Kayode Tokede
Amid high cost of borrowing and rising debt service pressure, the federal government, through the Debt Management Office (DMO), raised an estimated N6.49 trillion via FGN Bond in months of 2026.
The N6.49 trillion FGN Bond raised between January and August 2026 is against a backdrop of sustained government reliance on the domestic debt market to fund fiscal obligations amid constrained external financing conditions.
Analysis of the DMO monthly auction showed that the total subscription during the period stood at N12.22 trillion, a reflection that investors, especially the Pension Fund Administrators (PFAs) prefer to invest in risk-free instruments such as the FGN Bond and the Nigerian Treasury Bills (NTBs).
The DMO total offered amount stood at N7.35 trillion to investors, but eventually settled for N6.49 trillion amid high cost of borrowing and rising debt service pressure.
PFAs and fund managers have played a critical role in driving trading volumes in the bond market.
Since the beginning of the year, the DMO has continually re-opened some FGN Bonds amid modest interest rates in a bid to attract investors and support the government in bridging the budget deficit.
Insight into the latest FGN Auction for August 2026 showed that the DMO reopened the JAN-2035, APR-2037 and JUN-2038 bonds, offering a total of N1.10 trillion.
Total demand settled at N1.73 trillion (bid-to-offer: 1.6x), with the DMO eventually allotting N805.16 billion (bid-to-cover: 2.2x).
The stop rates on the JAN-2035, APR-2037 and JUN 2038 bonds, which were on-the-run at the previous auction, contracted by 119bps, 116bps and 61bps to settle at 17.15%, 17.19% and 17.79%, respectively.
For July 2026, DMO had reopened the JAN-2035, APR-2037 and JUN-2038 bonds, offering a total of N1.20 trillion.
Total demand settled at N1.74 trillion (bid-to-offer: 1.4x), with the DMO eventually allotting N931.82 billion (bid-to-cover: 1.9x). The stop rates on the JAN-2035 and APR-2037 bonds, which were on-the-run at the previous auction, remained unchanged at 18.34% and 18.35%, respectively, while the JUN-2038 bond settled at 18.40%.
In addition, the DMO in June 2026 reopened the JAN-2035 and APR-2037 bonds, offering a total of N1.20 trillion. Total demand settled at N1.41 trillion (bid-to-offer: 1.2x), with the DMO eventually allotting N1.22 trillion (bid-to-cover: 1.2x). The stop rate on the JAN-2035 and APR-2037, which were on-the-run last month, expanded by 134bps and 131bps to 18.34% and 18.35%, respectively.
Investor participation was broad-based, but demand was heavily skewed toward the long end of the curve, reflecting continued preference for higher yields in a tight monetary environment.
However, the widespread bid rates, ranging from 15.00per cent to 22.60per cent, also point to divergent investor expectations around inflation, monetary policy direction, and future interest rate movements.
Analysts attributed the strong demand for FGN bonds to modest yields, stressing that the over-subscription also revealed that investors have confidence in the federal government’s ability to meet its debt obligations.
The appetite for FGN bonds indicates that PFAs, and Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns albeit with low yield on investment.
“So, investors expect higher yield for this particular issuance, while the government does not wish to borrow at a higher interest rate,” said an investment banker & stockbroker, Mr. Tajudeen Olayinka.