Foreign investors return to Nigeria’s Eurobonds

Yields on Nigeria’s sovereign Eurobonds declined as foreign investors increased purchases of the country’s dollar-denominated debt, signalling improved demand for Nigerian assets in international markets.

The average Eurobond yield fell by four basis points to 7.03 per cent, supported by renewed buying interest and optimism about Nigeria’s economic reforms and improving oil-related fiscal prospects, according to Cowry Asset Limited.

The demand emerged despite selling pressure across parts of the African Eurobond market, with investors targeting Nigerian securities ahead of fresh inflation data and developments in global crude oil prices.

Market activity showed that buying interest was strongest in short- and medium-term maturities, particularly the FGN Euro 3 and FGN Euro 7 bonds, whose yields declined by 24 basis points each to 5.96 per cent and 7.23 per cent, respectively.

Other maturities also recorded declines. The FGN Euro 5 yield dropped by 21 basis points to 6.83 per cent, while the FGN Euro 10 fell by 19 basis points to 7.65 per cent.

The ultra-long FGN Euro 20 bond recorded a smaller decline of 14 basis points, bringing its yield to 8.34 per cent.

The latest movement followed a broader rally in Nigerian Eurobonds last week, when average benchmark yields contracted by 16 basis points.

The March 2029 and February 2032 notes recorded the steepest declines, with their yields falling by 19 basis points each.

• Eagles face early AFCON 2027 qualifiers test in Uyo
• Netherlands seeks stronger Nigeria ties on food security, ports
• Bolt invests N140bn in Nigeria

Analysts attributed the improved demand partly to investors seeking opportunities in Nigerian dollar securities amid expectations of stronger oil-related revenue and continued implementation of economic reforms.

The outlook has also been supported by the United States Federal Reserve’s decision to pause interest rate increases, which could sustain demand for emerging-market debt.

However, analysts cautioned that persistent inflationary pressures and elevated global borrowing costs could limit further declines in Nigerian Eurobond yields.

“Right now, the direction of international interest rates, crude oil prices and domestic inflation will remain important factors shaping foreign investors’ appetite for Nigeria’s external debt,” said an Abuja-based economist, Chukwunonso Iheoma.

He said the decline in Nigeria’s Eurobond yields suggests that investors were becoming more comfortable with the country’s sovereign risk and were now willing to take exposure to its dollar-denominated debt.

“However, sustaining that momentum will depend on Nigeria’s ability to strengthen foreign exchange earnings, manage debt-servicing obligations and demonstrate durable macroeconomic stability,” he added.