Market News

Data published by the Central Bank of Nigeria (CBN) showed that the naira weakened by N2.85, with the dollar quoted at N1,329.15 on Tuesday, representing a 0.2 percent loss compared with the N1,326.30 quoted on Monday at the Nigerian Foreign Exchange Market (NFEM).

Dollar liquidity improved as total turnover at the interbank segment of the FX market surged by 174.16 percent to $262.12 million on Tuesday, from $95.61 million recorded on Monday. The number of deals also increased by 57.79 percent, rising from 109 on Monday to 172 deals on Tuesday.

Although the NFEM figures for Tuesday’s deals and turnover were not available at the time of reporting, the number of deals at the NFEM window rose by 3.4 percent to 301 on Monday, from 291 deals on Friday. However, total turnover at the NFEM window declined by 7.63 percent to $423.95 million on Monday, from $458.99 million recorded on Friday.

Nigeria’s external reserves, which give the CBN the firepower to support the naira and meet the country’s external obligations, have maintained a steady growth trajectory, rising by 30.52 percent to $54.61 billion as of September 14, 2026.

The reserves represented an 18-year high, compared with $41.84 billion recorded in the corresponding period of 2025, according to data published on the CBN website.

J.P. Morgan has returned Nigerian local-currency bonds to its tracking indexes after an 11-year absence, assigning them a 7.4 percent allocation in the newly launched Government Bond Index-Emerging Markets (GBI-EM) Edge.

Ayokunle Olubunmi, head of Financial Institutions Ratings, Agusto & Co., said the inclusion will decrease demand for Nigeria’s debt instrument which will drive down the associated yields. “Ultimately, it will reduce funding cost as the yield is used as the basis for determining the borrowing rate,” he said.

The inclusion is expected to improve the visibility of Nigeria’s domestic debt market among global investors and could support increased foreign portfolio flows into the country’s local-currency bond market.

Meanwhile, FTSE Russell has confirmed, in a market notice published on Thursday, August 27, 2026, that Nigeria’s reclassification from Unclassified to Frontier Market status will proceed from the open of trading on September 21, 2026.

The decision marks Nigeria’s return to the global Frontier Market universe and represents an important milestone for the country’s capital market, following its removal from the index in 2023 amid concerns over foreign exchange liquidity, capital repatriation and market accessibility.

Analysts at Coronation Merchant Bank said the naira is expected to remain broadly stable in the near term, largely supported by continued improvements in external reserves, while FTSE Russell’s index inclusion is expected to provide gradual support in the medium to long term.

A report by Coronation Merchant Bank said the naira had a mixed performance last week, as the official rate weakened while the parallel-market rate strengthened.

At the official market, the currency depreciated by 0.40 percent week-on-week to N1,326.52 per dollar, from N1,321.22 per dollar in the previous week. The currency recorded its weakest single-day print on Wednesday, September 9, 2026, when the official rate touched N1,329.21 per dollar.

Conversely, the parallel-market rate strengthened by 0.36 percent week-on-week to N1,385.00 per dollar, from N1,390.00 per dollar in the previous week.

Consequently, the parallel-market premium moderated to N58.48 per dollar, from N68.78 per dollar in the previous week, narrowing the spread between both windows, although a significant gap persists.

Analysts adopt wait-and-see approach in bond market

Meanwhile, in the bond market, analysts are still testing to see whether Nigeria’s high-yielding local debt can attract fresh foreign demand at a time when rising US yields are making global investors more selective. “We have not yet seen inflows coming into the local bond market since the announcement of it yet,” Victor Ogunfijo, head of fixed-income trading at CardinalStone, told BusinessDay.

Ogunfijo said the response could be delayed as offshore investors assess the newly created index and determine how to position their portfolios.

“The J.P. Morgan effect might be lagged,” he said.

Omobola Adu, a fixed-income analyst, also said it was too early to assess the immediate impact, noting that offshore fund managers were unlikely to reposition immediately around a new index.

The Federal Government’s September bond auction provides an early reference point, although its results cannot establish whether the inclusion has generated additional foreign demand.

The Debt Management Office offered N1tn across a new 16.80 percent FGN September 2036 bond and a reopening of the 15.45 percent FGN June 2038 bond on Monday.

The auction attracted N1.49tn in subscriptions, with the 2036 issue receiving N546.90bn in bids against N400bn offered and the 2038 bond receiving N947.83bn against N600bn offered.

The securities were allotted at marginal rates of 16.79 percent and 16.85 percent respectively.

While the subscription levels indicate continued demand for government debt, the auction took place on the same day as J.P. Morgan’s announcement, making it difficult to link the result to the index inclusion.

The more important test will be whether demand builds in the secondary market as investors begin positioning around Nigeria’s new weighting.

If additional foreign demand materialises, it could push bond prices higher and compress yields, potentially lowering the government’s cost of raising new domestic debt.

But Nigerian bonds are competing for capital against a global market where US yields remain elevated.

At around 16.7 percent, Nigerian government bond yields offer investors a substantial nominal return premium. However, foreign investors must also account for naira risk and the relative attractiveness of holding dollar-denominated assets as US yields rise.

Ogunfijo said this could limit the appeal of Nigerian debt despite its high yields.

“When US yields just keep moving up, there’s less incentive also,” he said.

The country has regained access to a major source of potential foreign demand, but investors still have to decide whether the additional return from naira assets is sufficient compensation for currency and market risks.

Adu said even a decline in Nigerian bond yields in the coming sessions would not necessarily prove that offshore investors were responding to the inclusion. Domestic institutional investors could also be positioning ahead of anticipated foreign demand.

For now, the market is waiting for clearer evidence.

A sustained decline in secondary-market yields alongside stronger trading activity and foreign participation would provide a stronger indication that the inclusion is beginning to influence investor positioning.

That would give the government a potentially important benefit beyond the reputational boost of returning to J.P. Morgan’s benchmark: stronger demand for FGN bonds could lower borrowing costs while greater foreign participation could support foreign exchange liquidity.