Barclays has advised investors to reduce exposure to Nigeria’s longer-dated dollar bonds and consider switching to shorter-term maturities, which now offer more attractive yields in the mid-section of the curve.
According to a Bloomberg report on Friday, analysts led by Andreas Kolbe maintain an overweight position on Nigerian hard-currency bonds but note that the country’s yield curve has not kept pace with the steepening seen in other emerging markets.
In many of those markets, shorter-dated bonds have rallied more strongly than longer-term securities.
Kolbe believes Nigerian short-dated bonds have room to catch up and suggests clients rotate out of the 2049 maturities into the 2033 issues. The Z-spread — a measure of the risk premium adjusted for volatility — between the 2033 and 2049 bonds has flattened by around 25 basis points year-to-date. This, he says, makes the curve appear “too flat” compared to high-yield peers.
“We hence think value has shifted away from the long end and into the 8- to 10-year belly of the curve,” Kolbe noted.
He added that the strategy should also benefit from “rolldown,” where bond prices rise as they move closer to maturity, providing further upside to investors.
Currently, Nigeria’s January 2049 bond yields approximately 10.8%, while the September 2033 bond offers about 10.4%. Both have seen yield declines of over 100 basis points since early April, driven by improved sentiment in emerging markets amid easing global tensions.
What you should know
Nigeria’s average yield premium over Treasuries stands currently at 571 basis points, down about 350 basis points since May 2023 when President Bola Ahmed Tinubu took office and embarked on a series of reforms.
- The Nigerian Treasury Bills (NTB) auction held on May 21, 2025, witnessed intense demand from investors, with the 364-day tenor attracting N1.05 trillion in subscriptions, over three times the N350 billion initially offered.
- The auction, conducted by the Central Bank of Nigeria (CBN), recorded total subscriptions of N1.17 trillion across the 91-day, 182-day, and 364-day instruments, far surpassing the total offer of N500 billion.
- Despite the strong demand, the CBN maintained a relatively tight stance on rates.
- It left the stop rates for the 91-day and 182-day papers unchanged at 18.00% and 20.00%, respectively, while trimming the 364-day stop rate marginally by 7 basis points, from 19.63% to 19.56%.
This slight adjustment suggests the apex bank is trying to manage the government’s borrowing costs without dampening the investor appetite for fixed-income instruments.
