Rising yields on FGN Eurobonds heighten concerns about fiscal stability

Wave of apprehension is sweeping through the international investment community as yields on Nigeria’s Federal Government (FGN), Eurobonds have surged significantly, reflecting growing doubts about the country’s fiscal discipline and economic management.
Recall in July, yields on Nigeria’s FGN Eurobonds saw a sharp rise, with short-to-medium duration bonds increasing by 69 basis points, and mid-to-long duration bonds climbing by 75 basis points, this trend marks a stark departure from the optimism that characterised the market earlier in 2023, when investors responded positively to the new administration’s reforms.
When the new government assumed office in May 2023, its swift actions, particularly the removal of fuel subsidies and the unification of exchange rates, were met with approval from international investors, which was mirrored in the rally of FGN Eurobond prices, causing yields to drop to their lowest levels in years by March 2024.
However, by mid-July 2024, this optimism began to wane, as yields started to climb once again, in particular, the average yield on short-to-medium duration Eurobonds has risen by 69 basis points.