Nigeria’s fixed-income market is experiencing a significant turnaround as Treasury bills and Federal Government of Nigeria (FGN) bonds are once again generating returns above the country’s inflation rate. The latest inflation data released by the National Bureau of Statistics (NBS) showed headline inflation eased slightly to 15.91% in June 2026, down from 15.93% in May. While the decline appears modest, it marks an important shift for investors who have spent years watching inflation erode the value of their fixed-income investments.
The easing inflation trend, combined with still-elevated government borrowing costs, has created a rare opportunity for investors to earn positive real returns. At the June FGN bond auction, the January 2035 and April 2037 bonds recorded marginal rates of 18.34% and 18.35%, respectively, comfortably above the inflation rate. Treasury bills have also remained attractive, with the one-year instrument posting a stop rate of 17.66% at the July auction, making it one of the most sought-after investment options in the market.
Market analysts believe Treasury bills currently offer the strongest value among government-backed securities. Abiodun Ogunniyi, Head of Research at GTI Limited, noted that Treasury bills provide the highest returns within the fixed-income space, particularly for investors seeking shorter investment horizons. According to him, real returns on Treasury bills are estimated at between 3% and 3.5%, outperforming conventional FGN bonds, which currently offer inflation-adjusted returns of roughly 2% to 2.5%. However, he expressed less enthusiasm for FGN Savings Bonds, whose latest coupon rates remain slightly below the inflation rate.
Investor interest in government securities has surged as market participants seek to take advantage of the favorable yield environment. Treasury bill turnover jumped by over 137% to N1.51 trillion, while FGN bond turnover climbed nearly 76% to N1.20 trillion during the week ended June 19. Demand for longer-dated Treasury bills has been particularly strong, with subscriptions for the 364-day bill at the July 15 auction exceeding the N400 billion offered by more than seven times, highlighting growing investor confidence in the asset class.
Despite the current optimism, analysts caution that the window for locking in these attractive returns may not remain open for long. With inflation gradually moderating and expectations growing that the Central Bank of Nigeria could begin easing interest rates later this year, yields may start to decline. While institutions such as Standard Chartered and Cowry Research foresee potential rate cuts if disinflation continues, investors are increasingly moving quickly to secure today’s higher yields before market conditions change. For now, Treasury bills remain the standout performer, offering a combination of strong returns, liquidity, and protection against inflation that is drawing significant attention across Nigeria’s investment landscape.
source: nairametrics
