Nigeria’s Eurobond market posted a strong performance in February, reflecting growing foreign investor confidence. Data from the Debt Management Office (DMO) showed that the average yield on Nigerian Eurobonds fell to 8.80% by the end of the month, down from 9.21% at the start. This drop signals solid investor interest despite global economic uncertainties. The broader Sub-Saharan African Eurobond market also experienced a decline in yields, but Nigeria outperformed the region with a more significant decrease.
Analysts attribute the rally to improving macroeconomic conditions and a global shift towards lower interest rates. Afrinvest analysts highlighted Kenya’s bond market as a major driver, with the country’s yields dropping after the announcement of a centralized bond reporting system. Nigeria followed this positive trend, with foreign investors actively engaging in the market, pushing yields down. However, slight sell-offs late in the month caused a marginal increase in yields from 8.79% to 8.80%.
Despite some volatility caused by geopolitical uncertainties and soft labor market data from the U.S., analysts at CSL believe that global risk-off trends have influenced the Eurobond market. These developments have led to cautious trading across emerging markets, including Nigerian Eurobonds. Additionally, analysts noted that the global economic landscape, including U.S. GDP growth and rising jobless claims, contributed to some hesitance among investors.
Looking ahead, Afrinvest remains optimistic about the Nigerian Eurobond market, predicting a continuation of favorable trends. The anticipation of significant liquidity inflows from coupon payments and bond maturities, coupled with a dovish interest rate outlook, suggests that Nigeria will continue to attract foreign interest. Analysts expect the search for yield in Sub-Saharan Africa to persist, reinforcing the region’s appeal to offshore investors.
SOURCE: BUSINESS DAY