Market News

A sharp rise in foreign-currency liquidity across Nigeria’s banking sector is reducing the risk around about $1.7 billion of Eurobonds due in 2026, even as the Central Bank of Nigeria pivot to easing cycle is changing how investors earn from fixed income, equities, and deposits.

Fitch Ratings, in a report released Friday, said stronger dollar inflows and higher external reserves have left banks with enough foreign-currency cash to meet upcoming obligations without rushing to refinance.

Nigeria’s gross reserves increased to $46.3 billion in January 2026 from $32.2 billion in April 2024, helping the central bank clear overdue forex forwards and settle swaps with lenders.

FX reserves are now currently at about $50 billion, marking the highest in 13 years, according to CBN governor Olayemi Cardoso. That flow of dollars has allowed banks to cut reliance on foreign credit lines and rebuild balances with overseas counterparties.

The sector moved from a net foreign liability position of $2.6 billion in 2022 to net foreign assets of about $11 billion by the third quarter of 2025, the report notes.

“Fitch-rated banks with maturing or callable Eurobond debt have sufficient FC liquid assets to redeem the bonds without the need for refinancing,” the rating agency said.

The report added that Access Bank, Fidelity Bank, and United Bank for Africa have $1.2 billion of bonds maturing between September and November 2026. Access Bank also has a $500 million additional tier-1 instrument with a call date in October.

The lender’s capital ratio stood at 16.5 percent as of the third quarter of 2025, slightly above the 15 percent regulatory minimum, but it has raised tier-2 capital and plans to grow capital internally before the call date.

Ecobank Nigeria has already repaid its $300 million Eurobond after early buybacks in 2025. Fitch said its dollar liquidity remains tight but enough to service foreign-currency deposits, even as the bank continues to operate below the minimum capital requirement under regulatory forbearance.

“The improvement in dollar liquidity follows reforms and the naira devaluation in 2023–2024, which increased foreign-exchange market activity and reduced the need for importers to obtain hard currency from banks,” it said.

Rate cut opens a new cycle

While banks are entering 2026 with stronger foreign-currency buffers, the domestic interest rate cycle has begun to turn.

The Monetary Policy Committee cut the benchmark rate to 26.5 percent from 27 percent, the second reduction since Olayemi Cardoso became governor.

“The bigger question for investors is simple: how does this decision affect the value of your portfolio?” an analyst at the Financial Markets Dealers Association (FMDA) said.

The answer depends on where the money is placed, the analysts disclosed.

Long-term government bonds gain when rates fall because their prices rise. Short-term instruments such as Treasury bills and fixed deposits see lower returns when they mature and are reinvested.

“A five-year federal government bond bought at a yield of 16.5 percent would trade above its purchase price if yields drop to 15.5 percent, creating valuation gains for pension funds and other large investors. A short-term instrument over about five months would record only a small price increase under the same conditions,” the analysts added.

Bond prices and yields move in opposite directions.

For savers, the effect is different. Fixed-deposit rates and Treasury-bill yields are expected to decline gradually, meaning new placements will earn less than before.

Borrowers, however, stand to benefit as funding costs ease if banks adjust lending rates.

Lower yields also reduce borrowing costs for the government and companies issuing new debt.

Equities draw new flows

According to FMDA analysts, the change in rates is also shifting asset allocation.

“With fixed-income returns set to moderate over time, investors are expected to move part of their funds into equities. Lower borrowing costs can support company earnings and expansion,” the analysts added.

The stock market returned 51.2 percent in 2025 and has gained more than 20 percent so far in 2026.

Stronger banks, changing portfolios

The combination of higher dollar liquidity and lower naira interest rates is creating two parallel adjustments in the financial system.

Banks now face less pressure to refinance foreign debt and have more flexibility in managing their balance sheets.

“Investors, meanwhile, are moving from a period where cash and Treasury bills delivered high income to one where capital gains on bonds and opportunities in equities become more important,” the analysts disclosed.