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The short answer
An FGN bond's coupon is fixed when it is issued, so if market yields rise, new buyers will only pay a lower price for the old bond, enough that its fixed coupons plus the face value at maturity give them the new, higher yield. The longer the bond has left to run, the bigger the price fall for the same rise in yields.
The idea in plain terms
Suppose you hold a bond paying 15% a year on ₦1,000,000 face value. Then the government starts issuing similar bonds paying 18%. Nobody will pay you ₦1,000,000 for a bond paying 15% when they can buy a new one paying 18%. To sell, you must cut the price until your bond's 15% coupons, plus the full ₦1,000,000 at maturity, add up to an 18% return for the buyer. That is the inverse relationship: yields up, prices down. It works the other way too: if yields fall to 12%, your 15% bond becomes more valuable and its price rises above face.
Nothing changes in what the Federal Government owes you. If you hold to maturity you still receive every coupon and the face value. The price change matters only if you sell, or if you value your holding at market prices.
Worked example (illustrative bond)
Example: ₦1,000,000 face value, 15% coupon paid half-yearly (₦75,000 every six months). The price is the present value of the remaining coupons and face value at the market yield.
| Market yield | Price with 1 year left | Price with 5 years left | Price with 10 years left |
|---|---|---|---|
| 12% | ₦1,027,500.89 | ₦1,110,401.31 | ₦1,172,048.82 |
| 15% | ₦1,000,000.00 | ₦1,000,000.00 | ₦1,000,000.00 |
| 18% | ₦973,613.33 | ₦903,735.13 | ₦863,071.81 |
Read across the 18% row: the same three-point rise in yields knocks about 2.6% off the 1-year bond, about 9.6% off the 5-year bond and about 13.7% off the 10-year bond. Longer bonds have more future coupons priced at the old, lower rate, so they suffer more.
How the price is calculated
Price = sum of each coupon ÷ (1 + y/2)^n + face value ÷ (1 + y/2)^N, where y is the annual market yield, n counts each half-year to that coupon and N is the number of half-years to maturity. Spreadsheet functions such as PV or PRICE do this for you.
Clean price, dirty price and accrued interest
When you buy a bond between coupon dates, the seller has earned part of the next coupon. Dealers usually quote a clean price, without that accrued amount, and the buyer pays the clean price plus accrued interest, called the dirty price. Example: on the illustrative bond above, three months after a coupon date the seller has earned roughly half of the next ₦75,000 coupon, about ₦37,500, so a buyer at a clean price of ₦903,735.13 would pay around ₦941,235 in total, then receive the full ₦75,000 coupon three months later. Price falls caused by higher yields show up in the clean price.
What this means if you hold FGN bonds
- Holding to maturity: price moves do not change your cash flows. You receive the coupons and face value as scheduled.
- Selling early: you get the market price on the day, which can be above or below what you paid.
- Buying after a rise in yields: you pay less than face and earn the higher yield if you hold to maturity.
- Funds that hold bonds: a bond fund's unit price moves with bond prices, so its value can fall when yields rise.
Why Nigerian yields move
Yields respond to the same forces as treasury bill rates: the CBN's Monetary Policy Rate, inflation, liquidity and government borrowing. The CBN's Monetary Policy Committee reset the MPR to 23% in September 2026 from 26.5%, according to its monetary policy decisions page, and headline inflation was 14.63% in September 2026, per NBS data reported by Voice of Nigeria. Moves like these change what investors demand from new bonds, and so the prices of old ones. See what moves treasury bill rates and the yield curve explained.
Why savings bonds and bills feel calmer
The FGN Savings Bond runs for only 2 or 3 years and is mostly held to maturity by retail savers, so price swings matter less to most holders, though it is listed on the NGX and does have a market price. Treasury bills mature within a year, so their price sensitivity is small. Compare these in treasury bills vs FGN bonds.
What to check before you buy or sell
- How many years are left to maturity? More years, more price risk.
- What yield are you buying at, not just the coupon?
- Could you hold to maturity if prices fall?
- What price is a dealer quoting, and does it include accrued interest?
This is information, not investment advice. Our guide to how FGN bonds work covers auctions and coupons.
Questions people ask
Why do bond prices go down when interest rates go up?
Because the coupon is fixed. When new bonds pay more, an old bond has to sell at a lower price so a buyer earns the new, higher yield.
Will I lose money on FGN bond if rates rise?
Only if you sell before maturity at a lower price. Held to maturity, you receive all coupons and the face value.
What is the difference between coupon and yield?
The coupon is the fixed payment set at issue. The yield is the return a buyer earns at today's price, which changes with the market.
Do longer bonds fall more when yields rise?
Yes. In our illustrative example, a three-point rise in yields cuts a 1-year bond's price by about 2.6% and a 10-year bond's by about 13.7%.
Sources
- CBN: Monetary Policy Decisions (MPC meetings 2026) · accessed Oct 2026
- Voice of Nigeria: Nigeria's headline inflation drops to 14.63 per cent (16 Oct 2026) · accessed Oct 2026
- DMO: FGN Savings Bond offer for subscription, April 2026 · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.