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Financial market analysts have cautioned that rising geopolitical tensions involving the United States, Israel and Iran could trigger sell-offs in Nigeria’s Eurobond market as global investors reassess risk exposure to emerging economies.
Experts say heightened global uncertainty typically pushes investors away from riskier assets such as emerging market sovereign bonds and toward safe-haven instruments, potentially increasing borrowing costs for countries like Nigeria.
Speaking in an exclusive interview with THE WHISTLER, the Managing Director of Arthur Stevens Asset Management Limited and former President of the Chartered Institute of Stockbrokers, Tunde Amolegbe, said geopolitical conflicts historically weaken investor appetite for emerging market debt.
According to him, the intensifying tensions in the Middle East could heighten global risk levels and trigger portfolio adjustments by international investors.
“In the Eurobond market, you are likely to witness significant sell-offs on the back of heightened global risk levels resulting from the war,” Amolegbe said.
He explained that during periods of geopolitical uncertainty, global investors typically rebalance their portfolios by shifting funds from emerging markets to safer assets such as U.S. Treasury securities and other low-risk financial instruments.
Also commenting on the development, the Group Managing Director of Crane Securities Limited, Mike Eze, said the impact of the geopolitical tensions on Nigeria’s financial markets may remain limited in the near term.
Eze noted that recent hostilities involving the United States, Israel and Iran have not significantly disrupted equity markets across many emerging economies, including Nigeria, suggesting that the Eurobond market could follow a similar pattern.
He added that Nigeria’s relatively stable external buffers could help moderate the effect of any negative investor sentiment in the international debt market.
According to him, foreign investors typically assess a country’s external reserves and sovereign wealth holdings before committing funds to international financial instruments such as foreign bonds and equities.
“Investors in that space usually look closely at a country’s foreign reserves and sovereign wealth funds before taking positions in international financial instruments like foreign bonds and equities,” Eze explained.
He added that such indicators provide assurances about a country’s capacity to meet its financial obligations across the short, medium and long term.
Market data already suggests growing caution among global investors.
Analysts on Broadstreet reported that the average yield on Nigerian sovereign Eurobonds increased by 26 basis points in the international debt capital market at the start of the week as foreign portfolio investors exited positions amid escalating Middle East tensions.
The average yield on Nigeria’s dollar-denominated sovereign bonds rose to about 7.43 per cent, reflecting weaker demand and a deterioration in investor sentiment toward the country’s Eurobond instruments.
A rise in bond yields typically signals a decline in prices, indicating that investors are demanding higher returns to compensate for perceived risk.
Analysts further noted that oil-linked African issuers, including Nigeria, faced notable selling pressure in international debt markets as investor sentiment shifted.
The pressure was compounded by a retreat in crude oil prices following an earlier rally, further weighing on debt instruments issued by oil-dependent economies.
While geopolitical crises often heighten volatility in global financial markets, analysts say countries with stronger foreign reserves and credible fiscal management frameworks are generally better positioned to withstand sudden shifts in investor sentiment and capital flows.
