Nigeria’s five-year bond yield dropped more than 200 basis points on Friday as yields fell across maturities, a day after the central bank unexpectedly cut its benchmark lending rate to stimulate growth in Africa’s largest economy, traders said.

The bank lowered its benchmark interest rate to 12.5 per cent from 13.5 per cent, on Thursday, triggering bond yields to fall.

The yield on the most liquid 5-year paper fell 201 basis points to 6.5 per cent while the 2026 paper, a seven year bond, with six years to maturity, fell 120 basis points to yield 8.8 per cent, following the rate cut.

Traders said the rate cut spurred buying interest from domestic funds battling with excess liquidity on the money market which worsened after foreign investors dumped local treasuries due to a plunge in oil prices that was exacerbated by the coronavirus pandemic.

The central bank’s governor on Thursday said Nigeria’s economy, which grew 1.87 per cent in the first quarter, could contract in the second and third quarters but recover in the fourth with the fiscal and monetary policy measures put in place by the authorities.