Traders at United Bank for Africa (UBA) have projected that cautious investor sentiment will continue to dominate the Nigerian fixed income market this week as attention shifts to Monday’s bond auction.
Market watchers note that the Federal Government of Nigeria (FGN) bond sale is a key driver of activity, with investors preferring to hold back until they see the outcome of the auction before making fresh commitments.
Speaking during a market discussion with CNBC Africa, Chuka Nwachukwu, Chief Dealer and Head of Trading at UBA, explained that investors are likely to remain cautious given the uncertainties around yields and liquidity conditions. He added that while appetite for government securities remains strong, traders are weighing their options carefully ahead of the auction.
According to him, “The cautious trading we are seeing now is not unusual. Investors tend to adopt a wait-and-see approach before auctions, especially when market signals are mixed. Liquidity remains healthy, but most players want clarity on how yields will be priced before they take bigger positions.”
At the Open Market Operations (OMO) segment, however, traders expect that the increased activity recorded in recent weeks will persist. Dealers say the central bank’s actions in mopping up excess liquidity continue to drive trading volumes, while demand from banks and institutional investors has kept the OMO market active.
Nwachukwu noted that the mix of cautious bond trading and vibrant OMO activity reflects the dual forces shaping Nigeria’s debt markets. “On one hand, the FGN bond auction dictates the tone for long-term yields. On the other, the OMO market provides opportunities for short-term positioning. We see both sides balancing each other this week,” he said.
Analysts add that the bond auction will also serve as a test of investor appetite following the recent decision of the Monetary Policy Committee (MPC) to adjust benchmark rates. With inflationary pressures still high, traders believe that the outcome of the auction will guide portfolio rebalancing in the weeks ahead.
The Nigerian debt market has witnessed stronger foreign investor interest in recent months, helped by improved forex liquidity and reforms by the Tinubu administration. However, many investors remain cautious, preferring government instruments with predictable risk-return profiles over riskier assets.
Market participants are also watching closely to see if the Debt Management Office (DMO) adjusts its issuance strategy in response to changing market conditions. The outcome of the auction is therefore expected to provide a clearer picture of both investor appetite and government borrowing costs.
