Nigeria’s latest $2.3 billion Eurobond issuance has reignited debate over the country’s rising debt costs, as Ugodre Obi-Chukwu, Founder and Chief Executive Officer of Nairametrics, described the deal as “expensive” and reflective of persistent investor caution toward Nigeria’s macroeconomic stability.
Speaking on Moneyline with Nancy, Obi-Chukwu noted that the yields — 8% for the 10-year tranche and 9% for the 20-year tranche — are unusually high for sovereign debt, particularly for a country seeking to rebuild investor confidence after years of fiscal strain and currency instability.
“Nine percent over twenty years is high. Unless Nigeria can refinance when rates fall, this could become a burden. The pricing reflects investor caution around Nigeria’s risk profile,” Obi-Chukwu explained.
High Demand, But At a High Price
The Federal Government announced the Eurobond sale earlier in the week, revealing that the issuance was oversubscribed by more than 400%. While this indicates strong investor appetite for Nigerian debt, Obi-Chukwu warned that the enthusiasm came at a steep cost.
“The oversubscription shows that foreign investors still see value in Nigeria,” he said. “But the yields also tell a different story — they show that investors are pricing in significant risk. Borrowing at this rate may help short-term funding needs, but it raises long-term sustainability questions.”
According to analysts, the high yields stem from global inflationary trends, elevated interest rates, and Nigeria’s own fiscal and exchange rate vulnerabilities. With debt servicing already consuming a large share of government revenue, further borrowing at such levels could intensify fiscal pressures.
Investor Sentiment and Debt Sustainability
Obi-Chukwu’s comments come amid growing scrutiny of Nigeria’s debt management strategy. Despite recent reforms by the Ministry of Finance and the Debt Management Office (DMO), Nigeria’s debt-to-GDP ratio and interest payment obligations remain concerning.
He emphasized that investor confidence, while improving, remains conditional — foreign investors are engaging with Nigerian assets, but demanding higher compensation for perceived risks such as exchange rate volatility, inflation, and policy inconsistency.
“The cost of borrowing cannot be ignored,” Obi-Chukwu cautioned. “It’s encouraging to see investor demand, but if the government continues to issue debt at these rates, it will weigh on our fiscal balance in the long run.”
He added that Nigeria must focus on enhancing revenue generation, curbing inflation, and building policy credibility to gradually lower borrowing costs in future debt issuances.
Zenith Bank’s Performance Reflects Sector Resilience
Turning to the domestic financial sector, Obi-Chukwu praised Zenith Bank Plc for delivering an exceptional third-quarter (Q3 2025) performance despite the tough macroeconomic backdrop.
The bank’s gross earnings rose 16% year-on-year to ₦3.4 trillion, driven largely by a 41% surge in interest income to ₦2.7 trillion. Pre-tax profit reached ₦917 billion, which he described as “mouth-watering for shareholders.”
Even after adjusting for foreign exchange revaluation gains that inflated 2024 results, Obi-Chukwu said Zenith’s core earnings performance remains “remarkably strong.”
“Stripping out FX gains, this is a lot more impressive than expected,” he noted. “Zenith continues to show that disciplined cost management and balance sheet strength are key to surviving in a high-rate environment.”
He further commended the bank for maintaining a net interest margin of around 12%, despite high funding costs, and keeping its cost-to-income ratio below 50%.
“That’s commendable,” he said. “With total assets at about ₦31 trillion, Zenith remains one of the most operationally efficient banks in the country.”
However, he advised Nigerian banks to diversify income streams and develop hedging strategies as foreign exchange gains normalize. “With the naira strengthening, banks must prepare for margin compression. Hedging will be critical,” he emphasized.
Outlook: Cautious Optimism for 2026
Looking ahead, Obi-Chukwu expressed cautious optimism for the Nigerian banking industry going into 2026. He noted that while some lenders are grappling with inflation and rising operating costs, others — especially the FUGAZ banks (First Bank, UBA, GTCO, Access, and Zenith) — continue to post solid growth.
“We’ve seen a mixed bag — some banks are thriving, others are adjusting. But overall, the sector is profitable, deposits are rising, and total assets are expanding. The FUGAZ banks alone now control over ₦150 trillion in assets,” he said.
He suggested that the next phase of growth for Nigerian banks should focus on efficient capital deployment, technological innovation, and risk diversification in anticipation of more volatile macroeconomic conditions.
In conclusion, while Obi-Chukwu welcomed Nigeria’s renewed access to international capital markets, he underscored the importance of managing the cost of debt carefully. “Borrowing is not inherently bad,” he said, “but when you’re paying 9% over 20 years, it must come with a clear plan for growth, stability, and fiscal responsibility.”
