Nelson-Siegel model fitted to FGN bond market data — plots the live yield curve, flags segment inversions, and identifies carry trade opportunities across the maturity spectrum.
Nelson-Siegel fit · Observed market yields · Historical comparison
⚠ Yield Curve Inversions Detected
0.083Y → 0.25Y: short rate exceeds long rate by 0.88pp
0.25Y → 0.5Y: short rate exceeds long rate by 1.14pp
0.5Y → 1Y: short rate exceeds long rate by 1.78pp
1Y → 2Y: short rate exceeds long rate by 2.21pp
2Y → 3Y: short rate exceeds long rate by 1.19pp
3Y → 5Y: short rate exceeds long rate by 1.07pp
5Y → 7Y: short rate exceeds long rate by 0.43pp
7Y → 10Y: short rate exceeds long rate by 0.3pp
10Y → 15Y: short rate exceeds long rate by 0.22pp
15Y → 20Y: short rate exceeds long rate by 0.11pp
20Y → 25Y: short rate exceeds long rate by 0.07pp
25Y → 30Y: short rate exceeds long rate by 0.04pp
Nigeria's curve is currently inverted at the short end due to the CBN's emergency rate hike cycle (MPR 27.5%). Bills yield more than medium-term bonds — a hawkish monetary policy signal.
| Instrument | Market | NS Fit | Error |
|---|---|---|---|
| 1M T-Bill | 26.90% | 27.94% | -1.04pp |
| 3M T-Bill | 26.85% | 27.06% | -0.21pp |
| 6M T-Bill | 26.30% | 25.92% | +0.38pp |
| 1Y T-Bill | 25.80% | 24.13% | +1.67pp |
| 2Y FGN | 21.50% | 21.92% | -0.42pp |
| 3Y FGN | 19.50% | 20.74% | -1.24pp |
| 5Y FGN | 18.75% | 19.66% | -0.91pp |
| 7Y FGN | 18.90% | 19.23% | -0.33pp |
| 10Y FGN | 18.80% | 18.93% | -0.13pp |
| 15Y FGN | 19.20% | 18.71% | +0.49pp |
| 20Y FGN | 19.60% | 18.60% | +1.00pp |
| 30Y FGN | 20.10% | 18.49% | +1.61pp |
The CBN raised the MPR from 11.5% (end-2022) to 27.5% by end-2024 — a 1,600bps tightening cycle driven by naira depreciation and inflation above 34%. This has produced a deeply inverted short end: 91-day T-bills yield ~27% while 10-year FGN bonds yield ~19%. Duration extension into the belly (3-7Y) offers the best risk-adjusted carry once the CBN pivots. The long end (15-30Y) remains relatively anchored by insurance and pension fund demand.
The Nelson-Siegel (1987) model parameterises the yield curve as: y(m) = β₀ + β₁·[(1−e^(−m/τ))/(m/τ)] + β₂·[(1−e^(−m/τ))/(m/τ) − e^(−m/τ)]. Parameters are fitted by gradient descent minimising sum of squared errors against observed FGN and T-bill yields. β₀ is the long-run level, β₁ the short-term slope loading, β₂ controls medium-term curvature, and τ governs where the hump peaks. Data sourced from DMO and CBN market data (December 2024 / January 2025).