Foreign Portfolio Investors (FPIs) significantly increased their interest in Nigeria’s fixed income instruments last week ahead of the June 24 Federal Government bond auction. This surge in demand was matched by a bullish sentiment in both the bond and foreign exchange markets. The Central Bank of Nigeria (CBN) further supported market stability by injecting $61 million into the banking system to help defend the naira.
Market data from FMDQ Exchange showed that total turnover in the FX Spot and Derivatives markets climbed to $1.91 billion, representing an 8.82% rise from the previous week. This growth was driven entirely by the spot market, as derivatives trading remained inactive. The naira responded positively, appreciating by 0.6% week-on-week to N1,548.00/$1, supported by increased dollar inflows from FPIs targeting high-yield government securities.
Meanwhile, the FX forward market also improved, with gains recorded in short- and medium-tenor contracts. The 1-month and 3-month forwards appreciated by 0.2% and 0.4%, respectively, although the 6-month rate remained unchanged. The 1-year forward, however, declined by 0.9%, closing at N1,904.50/$1. Despite these market improvements, Nigeria’s external reserves continued their downward trend, losing $219.56 million to settle at $37.71 billion, marking a fourth consecutive week of decline.
The secondary bond market witnessed strong demand, particularly from local institutional investors repositioning ahead of the DMO auction. Average yields on benchmark FGN bonds dropped by 27 basis points to 18.6%, with the short end of the yield curve seeing the most pronounced movement. The MAR-2027 bond fell 60 basis points, while other key instruments such as MAR-2035 and JAN-2042 also recorded sharp declines.
Looking ahead, all eyes are on the DMO’s upcoming N100 billion auction, which includes a re-opening of the APR-2029 bond and a new issue of the JUN-2032 bond. Analysts anticipate lower marginal rates, reflecting strong investor appetite and expectations of a more accommodative monetary policy stance. With continued CBN intervention and persistent global uncertainties, market participants are closely watching whether post-auction demand and monetary policy direction will sustain current momentum.
Source: The Sun