Bullish Momentum in Nigerian Fixed-Income Market to Slow in Q2 2025 Amid Global Trade Shifts

The Nigerian fixed-income market experienced significant bullish momentum in the first quarter of 2025, driven by factors such as inflation moderation, exchange rate stability, and higher rates on new issues, according to a report by Proshare. This positive trend saw increased demand, especially in short-term instruments, as investors capitalized on favorable high rates, with the Nigerian Treasury Bill yield dropping significantly from 25.53% to 19.35% between January and March 2025.

However, experts warn that the outlook for Q2 2025 may be less optimistic due to evolving global trade dynamics. The recent unveiling of expansive U.S. tariffs, targeting over 100 countries, including Nigeria, is a significant concern. The tariffs, along with the potential impact of lower crude oil prices on Nigeria’s foreign exchange (FX) revenue, are expected to dampen investor sentiment and slow the bullish momentum in the local fixed-income market.

The report highlights that while the global economic landscape could lead to slower growth in Nigeria’s fixed-income market, the country’s improved net foreign reserves and the stability of the naira may provide some relief. This could mitigate rising debt sustainability risks that have the potential to trigger sell-offs. Despite the challenges, the market is not expected to experience a complete reversal, and there will still be opportunities for selective investors who can adapt to the changing environment.

As a result, investors are advised to remain cautious and focus on inflation-protected bonds and short-duration instruments to minimize risks associated with rising costs and geopolitical uncertainties. Meanwhile, developed markets may still attract investors seeking stable fixed-income opportunities, especially if inflation expectations stabilize and interest rates remain relatively lower.

Source: the sun