Foreign Portfolio Investors (FPIs) have reduced their Nigeria Eurobond holdings amid risk-off sentiment. The Central Bank of Nigeria kept the Monetary Policy Rate unchanged in February, aiming for stability. Meanwhile, external concerns from the U.S. economic climate and oil price drops have impacted market sentiment, raising Nigerian Eurobond yields.
Foreign Portfolio Investors (FPIs) have reduced their holdings of Nigeria’s sovereign Eurobonds in the international market due to risk-off sentiment. This trend arises as foreign investors adopt a bearish outlook while assessing critical developments in Nigeria against global market conditions. The Central Bank of Nigeria (CBN) opted to maintain the Monetary Policy Rate (MPR) and other key parameters during its February meeting, indicating a cautious approach to avoid market instability and ensure the effects of prior rate hikes are evaluated.
By preserving the current monetary stance, the CBN aims to mitigate potential shocks that could disrupt market stability, as stated in a commentary note by Erad Partners Limited. Concurrently, the U.S. economy began to display concerning indicators amidst the Trump administration’s protectionist policies, described by some analysts as driven by a ‘madman theory’ in policy-making. Recently, profit-taking in the Eurobond market persisted at a measured pace as investors looked to liquidate some assets after a period of initial optimism regarding tariff relief.
However, bearish sentiment returned following a fall in oil prices and a disappointing private-sector jobs report, which revealed only 77,000 jobs added in February—well below forecasts and indicating potential economic vulnerabilities. Consequently, the average mid-yield for Nigerian Eurobonds rose by 5 basis points to 9.02%, with selling pressure evident across the curve, especially affecting short-term maturities. Analysts predict that negative sentiment may persist unless favorable developments occur in either the international or local context.
February saw significant shifts in the global fixed-income market, influenced by monetary policy changes, geopolitical tensions, and emerging growth concerns as observed by CardinalStone Partners Limited. Bond yields declined across major economies, following movements in U.S. Treasury bonds. Notably, the 10-year Treasury yield fell to 4.2%, marking the lowest level since early December 2024, indicating a reversal from previous bearish reactions.
The financial landscape shifted as investors reacted to declining economic data, prompting a gradual reduction of associated risks within portfolios. The February ISM manufacturing survey particularly highlighted unexpected declines in new orders and employment metrics, further signaling signs of economic softening, along with a noted rejection of excess bids for local bonds in Nigeria.
In summary, Nigeria’s Eurobond yields have risen as Foreign Portfolio Investors have adjusted their holdings in response to global economic uncertainties and bearish sentiment. The Central Bank of Nigeria’s decision to maintain the Monetary Policy Rate aims to promote stability, but external factors, such as disappointing U.S. economic data and fluctuations in oil prices, contribute to a challenging investment environment. Market analysts anticipate continued negative sentiment unless there are favorable developments on both local and international fronts.
Original Source: dmarketforces.com
