Market review Q2 2026

Market review Q2 2026 Macro-Economic Overview Headline inflation rose steadily throughout Q2 2026, increasing from 15.69% in April to 15.93% YoY in May. The uptick was largely driven by higher transportation and energy costs stemming from the Middle East conflict, which also filtered through to food prices. However, the month-on-month (MoM) inflation trend told a slightly different story, easing from 2.13% in April to 1.75% in May, reflecting a moderation in sequential price pressures in May amid easing geopolitical tensions. At the Monetary Policy Committee (MPC) meeting held on 19th and 20th of May, the Committee retained the Monetary Policy Rate (MPR) at 26.50%, while maintaining the Standing Facilities Corridor at +50/-450 basis points around the MPR. The Cash Reserve Ratio (CRR) was also left unchanged at 45% for Deposit Money Banks, 16% for Merchant Banks, and 75% for non-TSA public sector deposits. Crude oil prices remained highly volatile in Q2 2026, largely reflecting geopolitical developments in the Middle East. Brent crude averaged approximately $96.01/barrel during the quarter, trading between a low of $72.60/barrel and a high of over $120/barrel. Prices surged sharply in April amid supply disruption fears linked to tensions around the Strait of Hormuz but moderated through May and June as supply conditions improved and ceasefire efforts gained traction. Nigeria’s Composite PMI weakened during Q2 2026, declining from 53.2 points in March to 49.4 points in April before printing at 49.6 points in May. This signals a second consecutive month of contraction in business activity after 16 months of expansion. This can be largely attributed to weaker activity in the industrial and services sectors. As of 29 June 2026, Nigeria’s gross external reserves stood at $51.43 billion, representing a 4.45% increase from the $49.24 billion recorded as of 31 March 2026. The total FAAC disbursement in Q2 so far amounted to approximately ₦2.13 trillion. Interbank liquidity remained robust during the quarter, averaging approximately ₦4.84 trillion, peaking at around ₦7.78 trillion in late April and dipping to approximately ₦2.57 trillion in mid-June. Sources: FMDQ, CBN, NBS, Bloomberg Bond market The FGN bond market experienced a notable shift in sentiment during Q2 2026 as investors reassessed the outlook for interest rates and the government’s borrowing plans. Trading remained largely selective throughout the quarter, with the secondary market alternating between bargain hunting and profit-taking as investors searched for attractive entry levels. Yields remained broadly range-bound through the early part of the quarter as market participants cautiously positioned ahead of fresh supply. Although demand at the April auction was robust, the DMO maintained its disciplined stance, allotting only ₦276.8bn of the ₦700bn offered across the 2030s, 2032s, and 2035s, closing at 16.30%, 16.50%, and 16.59%, respectively. The restrained allotment helped keep yields relatively anchored despite healthy investor demand. In May, the DMO reopened the 2035s and 2037s, closing at 17.00% and 17.04%, respectively, signalling the beginning of an upward adjustment in market yields and setting the tone for a broader repricing in June.  The market turned more bearish towards the end of the quarter as increased sovereign issuance prompted investors to demand higher yields. Selling pressure emerged across the curve ahead of the June auction, pushing yields upward before demand resurfaced at the new levels. The DMO offered ₦1.20tn across the 2035s and 2037s, attracting subscriptions of over ₦1.41tn and allotting ₦1.22tn at marginal rates of 18.34% and 18.35%, respectively. The uptick in rates from the previous month underscores the market’s repricing of sovereign risk, as investors sought greater compensation to absorb the significantly larger supply of government debt. Treasury Bill market The Nigeria Treasury bills market recorded mixed performance in Q2 2026, as the strong liquidity driven bullish bias witnessed at the start of the quarter gradually gave way to a more cautious trading environment. While the robust market liquidity and investor demand compressed yields, the inflationary pressures, heightened geopolitical tensions in the Middle East and the Monetary Policy Committee’s decision to maintain a hawkish stance ultimately shifted market sentiments further in the quarter. In April, the ample liquidity drove strong demand, particularly on the short-term bills, as investors sought to preserve portfolio flexibility amid the uncertain economic environment. The bullish run compressed secondary market yields, while the Primary Market Auctions (PMAs) attracted over c. ₦5.30 trillion in subscription, signaling a healthy investor appetite. Market sentiments moderate in May, as inflation rose to 15.69% from 15.38%, coupled with the heightened US-Iran tensions reinforced expectations of a resistant monetary policy environment. Mid-month the MPC met and MPR was maintained at 26.50%, driving average yields to decline marginally by 6bps in May. The Marker was repriced sharply in June following the significant increase in both CBN and DMO issuance. The DMO revised its quarterly NTB issuance from ₦3.95trn to ₦4.80trn, with both June auctions receiving larger offer sizes of ₦1.00trn from ₦700bn and ₦450bn respectively. At the final NTB auction of the quarter (17-Jun), we saw allotments increase further to ₦1.49trn, with stop rates climbing sharply to 16.28%, 16.50% and 17.34%, respectively. The higher Primary market Stop rates triggered a broad repricing in the secondary market, driving yields higher across the curve. Consequently, the benchmark 1-year NTB closed the quarter c. 21.00% yield. The CBN floated seventeen (17) OMO auctions during the quarter, offering c. ₦10.20 trn across the tenors. Total sales during the quarter over c. ₦32.00 trn. Despite the oversubscriptions recorded at the auctions, there were two (2) no sale during the auctions. The DMO conducted six (6) NTB auctions during the quarter with each month recording an oversubscription of ₦5.32 trn, ₦4.40 trn and ₦4.02 trn respectively. In total the DMO oversold N1.34 trn, by allotting N6.14trn against the N4.80trn on offer. Eurobond Market Global macro conditions remained mixed during the second quarter of 2026. Major central banks paused their aggressive tightening cycles. The Federal Reserve maintained its funds rate at 3.50% to 3.75%, while the European Central Bank held rates before raising its deposit rate to 2.25% in June. Energy markets saw high volatility; Brent crude spiked