September 7, 2026/InvestmentOne Report
August closed with a firmer macro backdrop for Nigerian fixed income. Real GDP expanded by 4.43% 4.43% YoY in Q2:2026, improving from 3.89% in Q1:2026 and 4.23% in Q2:2025, while July headline inflation eased to 15.43% from 15.91% in June. Core inflation also moderated to 14.97% from 15.92%, giving the market a cleaner disinflation signal at a time when economic activity was strengthening.
Taken together, those releases moved the policy conversation further away from additional tightening and toward the timing of an eventual rate cut after the CBN kept the MPR at 26.50% in July.
Looking ahead, we expect the domestic fixed-income market to retain a mild bullish bias, although the opportunity should remain uneven across the curve. Softer headline and core inflation, together with stronger Q2 GDP growth, have strengthened expectations of a possible rate cut at the September MPC meeting. However, with food inflation still above 20%, the CBN is likely to remain cautious and continue managing liquidity closely.
The expanded OMO investor base should make sterilization more effective and may keep short- and mid-tenor money-market yields competitive even as policy expectations turn more dovish. For NTBs, persistent demand for the 364-day paper and the decline in its latest stop rate point to room for further long-end compression.
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