The Nigerian government recently issued a new 10-year bond with a record-breaking yield of 22.6%. This high interest rate, the highest ever for a Nigerian government bond, has sparked significant investor interest.
The new 10-year bond, maturing in January 2035, was oversubscribed by a substantial margin, attracting bids worth over N368 billion despite the government offering only N200 billion. This strong demand reflects investor confidence in the higher returns offered by this bond compared to other government securities.
Financial experts are advising investors to capitalize on this opportunity. Atiko Audu, Chief Investment Officer at ARM Pension Managers, suggested selling existing holdings in similar bonds with lower yields and reinvesting in the new 10-year bond. He emphasized the shorter maturity of the new bond and its significantly higher yield as key advantages.
Matilda Adefalujo, a fixed-income analyst at Meristem Securities, explained that the high yield on the 10-year bond is attracting investors seeking long-term investments in a period of economic uncertainty, with potential impacts from inflation and interest rate changes.
This strong demand has also driven up the value of other government bonds. Notably, the 7-year bond maturing in February 2031 achieved a historic milestone, surpassing N2 trillion in issuance.
The increased investor interest has led to a rise in yields across the board. The 5-year bond also saw a significant increase in yield, reaching a new record high.
The successful auction aligns with predictions from analysts at CardinalStone, who anticipate stable yields in the first half of 2025 followed by a potential decline in the second half. They recommend allocating a significant portion of investments to long-term bonds to benefit from potential price appreciation and mitigate reinvestment risks.
The Nigerian government plans to raise up to N1.8 trillion from the bond market in the first quarter of 2025, according to the Debt Management Office.
