Kayode Tokede
Despite modest yields, total subscription to FGN Bond between January to September 2026 crossed historic high of N13 trillion to N13.72 trillion.
The high demand for the FGN Bond is on the backdrop of large institutional investors demand, relatively attractive rates that encouraged pension funds, banks, insurance companies among others to lock in returns.
FGN Bond auction during the period under review is on the back of sustained government reliance on the domestic debt market to fund fiscal obligations amid constrained external financing conditions.
According to the FGN bond auction result obtained by THISDAY, the government through the Debt Management Office (DMO) in the nine months of 2026 offered to raise N8.35 trillion to bridge budget deficit.
The debt office, according to its monthly FGN auction results, however, raised an estimated N7.14 trillion during the nine months period.
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 latest auction results show strong but selective demand across the two instruments, with the 12-year paper dominating subscriptions.
This week, the DMO in its September 2026 FGN bond auction, issued 16.79% FGN SEP 2036 (New Issue) and 15.45% FGN JUN 2038 (Re-opening), offering a total of N1 trillion.
Total demand settled at N1.49 trillion, with the DMO eventually allotting N748.64 billion. The stop rate on the FGN SEP 2036 and FGN JUN 2038, which were on-the-run last month, expanded to 16.7900% and 16.8500%, respectively.
DMO data showed that investor demand was strongest at the long end, while shorter tenors saw relatively softer participation, particularly the 10-year bond which was over-subscribed.
The amount offered by DMO fell from N1.10 trillion in August to N1 trillion in September 2026, a reduction of N100 billion or 9.1per cent. This indicates a slightly tighter FGN Bond supply in September 2026.
Reducing the amount of securities available can potentially help the FG manage debt. Subscriptions fell from N1.727 trillion in August 2026 to N1.495 trillion in September 2026, representing a much larger 13.5per cent decline.
Despite this decline, demand remained strong: investors still subscribed to about 1.49 times the amount offered in September 2026.
In addition, the amount allotted declined from N805.16 billion to N748.64 billion, a decrease of only seven per cent.
Consequently, the proportion of the amount offered that was allotted increased from 73.2 per cent in August to 74.9 per cent in September. In August, the coverage ratio was higher at 1.57 times. So, while demand weakened, the auction remained oversubscribed.
The DMO had targeted N1 trillion from the domestic debt market in its September 14 FGN bond auction, with a new 10-year issue and a reopening of an existing bond.
According to the DMO’s auction circular, the offer comprises N400 billion of the new FGN September 2036 bond and N600 billion of the 15.45% FGN June 2038 bond, which is being reopened.
Analysts attributed the strong demand for FGN bonds to modest yields, stressing that the over-subscription also showed investors’ confidence in the federal government’s ability to meet its debt obligations.