The Financial Markets Dealers Association, Financial Markets Dealers Association, says rising geopolitical tensions and persistent inflationary pressures are expected to keep interest rates elevated, despite earlier expectations of monetary easing.
In its post-Monetary Policy Committee commentary titled “What the MPC Hold Means for Your Portfolio,” the association said the decision by the Central Bank of Nigeria to retain the Monetary Policy Rate at 26.5 per cent reflects a cautious stance driven by global uncertainty, inflation risks, and ongoing conflicts in key regions.
FMDA noted that the prolonged high-interest-rate environment means investors in Treasury bills, Open Market Operations bills, commercial papers, and fixed deposits are likely to continue enjoying attractive returns in the short term.
It added that what was initially seen as the beginning of an easing cycle has been weakened by renewed global pressures, including rising bond yields and geopolitical instability.
The association disclosed that Nigerian bond yields have risen from about 15.86 per cent in February to around 16.20 per cent, signalling that the market is pricing in a “higher-for-longer” interest rate environment.
FMDA’s recent market survey also showed that traders and treasurers expect rates to remain elevated over the next six months, despite adequate liquidity in the financial system.
The report further explained that long-term bond holders are more exposed to valuation losses compared to short-term investors, highlighting the sensitivity of longer-dated securities to interest rate changes.
It also noted that while fixed-income markets face pressure, the equities market has continued to record strong gains, with returns rising above 60 per cent in recent months.
FMDA concluded that monetary easing in Nigeria is likely to be gradual, as global central banks also maintain cautious policies amid inflation and energy concerns.
