Investors’ Appetite Rises For Nigerian Bonds Despite Liquidity Strain

There is a renewed interest in Nigerian fixed income instruments, as investors begin to increase their positions across the bond curve despite prevailing liquidity constraints in the financial.

Treasury Team Lead at Access Bank, Kolawole Komolafe, in an interview on CNBC, said the renewed demand though measured is reflective of shifting sentiment as investors recalibrate portfolios in response to stabilising macroeconomic indicators and attractive yield levels.

Komolafe noted that, “there’s a notable uptick in buy-side activity, especially across medium to long-tenor bonds. While the pace of this demand is relatively cautious, we’re seeing elevated bids, which signal improved confidence in sovereign instruments.”

The fixed income market opened the week on a bearish note, with traders observing significant activity in benchmark bonds such as the FGN 2031 and 2033 papers, which were quoted at yields of 16.90 per cent and 16.70 per cent, respectively.

Average bids on benchmark papers rose by 10 basis points, further reflecting the shift in market positioning.

Commenting on the money market, Komolafe noted that the system is currently running on a repo position of approximately N250 billion, with overnight rates spiking above 32 per cent, underscoring the illiquidity challenges that continue to weigh on the short end of the curve.

On the foreign exchange front, Komolafe acknowledged recent volatility driven by profit-taking from some foreign direct investors (FDIs), but credited recent interventions by the Central Bank of Nigeria (CBN) with stabilising the market.

“On Monday, we observed an N11 appreciation in the benchmark rate, closing at N1,518 to the dollar. This recovery also reflected across the Nigerian Autonomous Foreign Exchange Market (NAFEX) and CBN official rates,” he added.

While foreign investor demand has cooled slightly following recent exits, Komolafe said underlying interest in Nigerian assets remains intact. “What we’re seeing now is not capital flight, but more of tactical portfolio rebalancing. The broader demand dynamic remains positive, and with continued monetary policy clarity, we expect further stability in both the bond and forex markets,” he added.

He stated that, despite tight system liquidity, Access Bank projects a cautiously optimistic outlook, supported by macroeconomic reforms and the CBN’s active management of the currency and debt markets.