By theG&Journal
TUE MAR 03 2026-theGBJournal| The Nigerian fixed-income market is witnessed a sharp repricing of risk on Tuesday, as Treasury bill and Federal Government of Nigeria (FGN) bond yields climb in direct response to the local currency’s recent slide.
Following a period of relative calm, the naira has faced renewed pressure at the official Nigerian Foreign Exchange Market (NFEM), crossing the N1,370/$ mark today after depreciating 2.1% to N1,392.00/US$1.
This depreciation has triggered an immediate reaction from investors who are demanding higher risk premiums to compensate for the eroding value of naira-denominated returns and the persistent threat of imported inflation.
The Treasury bills average yield expanded by 2bps to 16.6%.
Across the curve, the average yield contracted at the short (-1bp) and mid (-1bp) segments, due to the demand for the 80DTM (-1bp) and 171DTM (-1bp) bills, respectively but expanded at the long (+5bps) end, due to profit-taking activities on the 353DTM (+77bps) bill.
Conversely, the average yield contracted by 4bps to 21.1% in the OMO segment.
Long-term investors in FGN bonds are equally cautious, leading to a noticeable sell-off in the secondary market. As the naira weakens, foreign portfolio investors often recalibrate their exposure, seeking higher yields to offset potential currency losses.
This shift has pushed the benchmark 10-year bond yield toward 15.45%, reflecting a broader market consensus that the government must offer more attractive incentives to bridge the widening fiscal deficit, which is projected to exceed N25 trillion for the 2026 fiscal year.
The interplay between the falling naira and rising yields underscores a delicate balancing act for Nigeria’s economic managers. While higher yields are necessary to attract the dollar inflows needed to stabilize the exchange rate, they also significantly increase the cost of debt servicing for the federal government.
With public debt-to-GDP ratios projected to hit 40.6% this year, the rising cost of domestic borrowing creates a feedback loop where fiscal pressure and currency instability continue to drive the appetite for higher returns across the fixed-income spectrum.
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