Naira drops to N417/$1 as yields on FGN bonds climb higher to 10.9%

BY CHARLES ABUEDE

Nigeria’s domestic currency, the naira, has continued its downward slide, losing strength against the United States dollar at the NAFEX window as data obtained from the FMDQ FX segment showed that the naira slightly lost 0.08 percent of its opening value on Monday to close at N417 from N416.67 against the greenback, while the average yield on a federal government bond is now reaching 10.9 percent after it inched higher by 12 basis points in the local bond market as a result of the currency weakness.

At the end of trading activities on Monday, the FGN bonds secondary market closed on a negative note as the average bond yield across the curve cleared higher by 12 basis points to close at 10.98 percent from 10.86 percent reported last Friday.

Meanwhile, the average yields across the medium tenor and long tenor of the curve expanded by 29 basis points and six basis points, in that order. On the other hand, the average yields across the short tenor of the curve declined by one basis point.

Traders at FSDH Capital noted that the 23-MAR-2025 maturity bond was the best performer on Monday with a decrease in the yield by 21 basis points, while the 22-JAN-2026 maturity bond was the worst performer with a 46 basis points increase in the yield.

Fundamentally, the fixed income market has moved on a cautious mode amidst a high inflation rate in the country and a low-interest rate environment. But the real rate on fixed income instruments has been weakened further by the depreciation of the naira and market analysts have noted that this latest development was due to funding pressure on the system.

However, on Monday, the market opened with a system liquidity of N191 billion (positive) while the interbank money market rates closed within a range of seven percent and nine percent. Meanwhile, the treasury bills secondary market was quiet as the yields remained flat.

Meanwhile, trading activity levels for the FGN bonds market were relatively low on Monday as it was seen that buying demand on some maturities at the short and mid-end of the curve was offset by a sell-off on some maturities at the long end of the curve. As a result, the average yields expanded by four basis points across the curve.

Also, Nigeria’s sovereign Eurobond also sold off on Monday with yields expanding by 23 basis points across the curve.