Investors Sell Off Nigerian Bonds Over Good Governance Concerns Amid High Yields

In the second quarter of 2024, Nigerian bonds experienced significant sell-offs as investors prioritized good governance over high yields. This shift reflects a broader change in risk appetite among global investors, particularly in emerging markets.

Key Highlights:

• Bond Index Decline: The S&P/FMDQ Sovereign Bond Index dropped by 7.82%, falling from N593.86 billion in March 2024 to N547.61 billion by June 2024.

• Governance Concerns: Investors’ worries about governance overshadowed the attractive returns from bonds, especially as the Central Bank of Nigeria (CBN) raised the Monetary Policy Rate to a historic 26.25% to combat rising inflation, which hit 34.19% by the end of Q2.

• Increased Borrowing: [/b]The Federal Government auctioned N1.23 trillion in bonds during Q2, leading to a temporary retracement in yields.

• [b]Pension Fund Investments: [/b]Investments in Federal Government Securities rose by 6.22%, growing from N12.20 trillion to N12.96 trillion in the same period.

The second quarter of 2024 marked a volatile period for Nigerian bonds, driven by investor concerns over governance and the economic environment. While the Federal Government ramped up bond sales, [b]the overall sentiment reflected a cautious approach among investors, impacting bond performance.

Source: Nairametrics