Market News

Nigeria’s Eurobond yields spiked to 7.11 percent from 6.98 percent last Friday, as a dramatic escalation in the Middle East conflict triggered a global flight to safety. The sell-off comes as investors pivot away from emerging market debt toward traditional safe-haven assets like Gold and U.S. Treasuries, following news of a major military operation in Iran.

The bearish sentiment was felt across the continent, with Eurobonds in Sub-Saharan Africa trading weaker as the week opened. In the Nigerian market, core papers declined by between 12 and 60 cents in early trading.

This market turbulence follows a joint United States-Israeli operation targeting Iran’s nuclear and military infrastructure, a strike that resulted in the death of Ayatollah Ali Khamenei, Iran’s supreme leader. U.S. President Donald Trump stated over the weekend that the objectives of the mission must be met, signaling a potentially prolonged conflict.

For Nigeria, Africa’s largest oil producer, the crisis presents a double-edged sword, the promise of a fiscal windfall from soaring crude prices weighed against the threat of surging domestic energy costs and capital flight.

Oil price volatility and the net positive argument

The strikes upended global oil market assumptions over the weekend. Brent crude, the benchmark for Nigeria’s Bonny Light, climbed toward $73 per barrel by Sunday afternoon—its highest level in six months. By Monday, Brent was trading at $78.74/bbl after OPEC+ agreed to a slight production increase to stabilize the market.

While the price remains above Nigeria’s 2026 budget benchmark of $64.85, analysts are debating how much the country can actually gain.

“It’s still the tension, though. It’s just the initial frenzy,” said Matilda Adefalujo, a fixed-income analyst at Meristem Securities. “When investors can see the impact, it will be positive for oil prices. I mean, it’s a net positive for us. The only issue for us would just be the fuel price increases that will result from this, but largely, I think we are insulated.”

However, global analysts are bracing for a much higher ceiling. Analysts at JPMorgan, Goldman Sachs, and Barclays are debating whether $100 oil, a threshold not seen since 2022, is a matter of “when” rather than “if.” Helima Croft of RBC Capital Markets warned that a full-scale war on Iran could send prices well past the $100 mark.

As oil prices rose, Gold surged on Monday as bullion hit its highest level in over a month. This rotation out of riskier assets like Nigerian debt is seen by some as a tactical move rather than a fundamental shift in Nigeria’s credit story.

According to Reuters, spot gold gained 2.3 percent to $5,395.99 an ounce as of 0914 GMT, after hitting a more than four-week high earlier in the session. The metal hit a record high of $5,594.82 on January 29.

“Many of these foreign investors won’t wait until everything goes bad. In any scenario, what’s better to hold than USD cash?” noted Oise Ajayi, senior portfolio manager at Tangerine Life.

Ajayi suggests that while the current spike in yields looks alarming, it may provide a buying opportunity once the dust settles. “Markets have seen this type of knee-jerk reaction that didn’t last long. Yields will likely see a bounce back once things are stable, especially considering how improved our macro indicators are, barring any major direct external shocks. Once things settle, investors will be able to buy at attractive yields again.”