Nigeria’s bond market is currently facing serious challenges as investor interest has dropped due to fear of rising interest rates and uncertainty in the economy. The Central Bank of Nigeria, under the leadership of Governor Olayemi Cardoso, has increased interest rates in a bid to tackle inflation. However, this policy is affecting both corporate and government borrowing, as higher rates are discouraging investment.
According to a report by Radarr Africa, corporate bond issuance in Nigeria fell sharply by 98 percent from ₦249.4 billion in the last quarter of 2022 to just ₦5.5 billion in the first quarter of 2024. This major drop shows that companies are finding it more difficult to raise money through bonds. Similarly, commercial paper issuance also declined by 38 percent in the same period, going from ₦537.47 billion to ₦331.81 billion. Experts say these declines are the result of the Central Bank’s decision to raise the Monetary Policy Rate to 27.5 percent in November 2024, which makes it more expensive for companies to borrow money.
Even the federal government is feeling the heat. In February 2024, the Debt Management Office tried to raise ₦2.5 trillion through 7-year and 10-year bonds but could only raise ₦1.49 trillion. This means they achieved only 60 percent of their target. Analysts explained that the interest rates offered were too low to attract enough investors, especially in a high-inflation environment.
In addition to rising interest rates, issues of governance and investor confidence are affecting the market. The S&P/FMDQ Sovereign Bond Index, which tracks how Nigeria’s government bonds are performing, fell by 7.82 percent in the second quarter of 2024. This shows that investors are worried and are pulling out, even though the bonds offer higher yields.
Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise, has criticised the Central Bank’s continuous rate hikes. He said sectors like agriculture, real estate, and manufacturing are suffering and need support, not more pressure. He warned that if the trend continues, it could hurt the entire economy, especially small businesses and job creation.
Despite all these problems, there is a glimmer of hope. In February 2025, inflation dropped from 34.8 percent in December 2024 to 24.5 percent. This gave some relief to investors. That same month, the Debt Management Office held another bond auction and offered two bonds worth ₦350 billion. The auction was a success, with investors subscribing up to ₦1.6 trillion. This strong interest shows that if economic conditions improve, investors are willing to return to the market.
Still, many challenges remain. The government must work on improving economic stability and rebuilding investor trust. Experts say that beyond cutting inflation, the country needs to address public debt concerns, governance issues, and support the productive sectors of the economy.
Nigeria’s bond market plays a key role in raising funds for development. Without strong investor confidence, it will be harder for both the government and private companies to finance their operations and growth plans. As things stand, Nigeria must balance its fight against inflation with efforts to grow the economy and create jobs.
