Foreign investors buy $3.3bn Nigerian bonds in three months

Foreign investors channelled $3.23bn into Nigerian bonds in the first quarter of 2026, highlighting a strong appetite for the country’s fixed-income securities amid elevated interest rates and improving confidence in the foreign exchange market.

Data from the latest capital importation report released by the National Bureau of Statistics showed that bond investments accounted for 32.71 per cent of the $9.86bn portfolio investments recorded during the quarter and 31.10 per cent of the total $10.37bn capital imported into the country.

The bond inflow represented a 267.67 per cent increase from the $877.41m recorded in the corresponding period of 2025 and a 63.76 per cent rise from the $1.97bn attracted in the preceding quarter.

The surge in bond inflows came as total capital importation rose to $10.37bn in Q1 2026, an increase of 83.83 per cent from the $5.64bn recorded a year earlier and 60.97 per cent higher than the $6.44bn posted in the fourth quarter of 2025.

The report showed that portfolio investment remained the dominant investment category, attracting $9.86bn and accounting for 95.09 per cent of all capital imported during the quarter.

Within the portfolio investment segment, money market instruments led with $6.50bn, representing 65.95 per cent of portfolio inflows, while bonds followed with $3.23bn.

Equity investments remained subdued at $131.81m, accounting for just 1.34 per cent of portfolio investment.

The NBS noted, “Portfolio Investment ranked top with $9.86bn, accounting for 95.09 per cent, followed by Other Investment with $374.48m, accounting for 3.61 per cent. Foreign Direct Investment recorded the least with $135.08m.”

An analysis of the data showed that bonds recorded the fastest growth among the major portfolio investment components. While equity inflows increased by only 12.34 per cent year-on-year and money market investments rose by 54.51 per cent, bond inflows surged by 267.67 per cent, highlighting investors’ preference for longer-dated fixed-income instruments.

The sharp increase reflects the attractiveness of Nigerian sovereign debt instruments, which have offered among the highest yields in emerging and frontier markets following the Central Bank of Nigeria’s aggressive monetary-tightening cycle over the past two years.

Since assuming office in September 2023, CBN Governor Olayemi Cardoso has led the Monetary Policy Committee through one of the most aggressive tightening cycles in Nigeria’s history, raising the Monetary Policy Rate from 18.75 per cent to a peak of 27.50 per cent through a series of hikes in 2024 aimed at curbing inflation, stabilising the naira and restoring investor confidence.

After holding the benchmark rate at 27.50 per cent throughout most of 2025, the MPC began a cautious easing cycle in September 2025, cutting the MPR by 50 basis points to 27.00 per cent as inflation moderated for several consecutive months, before lowering it further to 26.50 per cent in early 2026.

At its most recent 305th meeting in May 2026, the MPC opted to retain the MPR at 26.50 per cent and leave all other key policy parameters unchanged, citing renewed inflationary pressures linked to global energy market disruptions while seeking to preserve the macroeconomic gains achieved through earlier tightening measures.

The NBS report further showed that the banking sector attracted the largest share of total capital inflows at $7.55bn, or 72.79 per cent, followed by the financing sector with $2.43bn, or 23.42 per cent.

By source country, the United Kingdom accounted for the largest share of capital importation at $5.08bn, or 49.01 per cent, followed by the United States with $3.18bn, or 30.69 per cent, and South Africa with $983.83m, or 9.49 per cent.

The figures suggest that foreign investors are increasingly deploying funds into Nigerian debt securities, betting on attractive yields and improved foreign exchange liquidity, even as foreign direct investment remained weak at just $135.08m, representing 1.30 per cent of total capital inflows during the quarter.

The PidomNigeria earlier reported that the Federal Government borrowed N2.69tn from the domestic bond market in the first quarter of 2026, as strong investor demand continued to drive subscriptions above offer levels despite tighter allotments.

An analysis of Debt Management Office auction results indicated that the total was raised through a combination of competitive and non-competitive allotments across the three months.

The figures showed that the government offered N2.45tn worth of bonds in the quarter, while investors submitted subscriptions totalling N5.88tn. Out of this, about 45.64 per cent was allotted, indicating that less than half of the total bids were accepted.

A year-on-year comparison showed that the government significantly increased its borrowing from the bond market. In the first quarter of 2025, total allotment stood at about N1.94tn, compared to N2.69tn in the same period of 2026, representing an increase of N750.08bn, or 38.76 per cent.

Reacting, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the surge in foreign investment into Nigerian bonds highlighted the trade-off between attracting capital and rising debt-servicing costs.

He noted that while high yields on government securities had helped draw portfolio investors, they were also increasing the burden of public debt. Yusuf told The PidomNigeria that the interest rates offered on government bonds and treasury instruments were excessively high and required coordination between fiscal and monetary authorities to moderate.

“It’s helping us to attract portfolio investment, but it’s creating a huge burden of debt service. We have to balance those two objectives. We have to improve portfolio flows, but it’s costing us a lot in terms of our domestic borrowing and debt-servicing costs,” he said.

The economist argued that Nigeria should reduce its reliance on debt-funded public projects by expanding public-private partnerships. According to him, governments should identify commercially viable infrastructure projects and offer them to private investors rather than financing them through additional borrowing.