The Federal Government raised N7.62tn from the domestic bond market between January and August 2026, as it continued to rely on the fixed-income market to finance its budget deficit and meet other fiscal obligations.
The funds were raised through eight Federal Government of Nigeria bond auctions conducted by the Debt Management Office (DMO) during the eight-month period.
The latest figures underscore the growing role of domestic borrowing in meeting the government’s financing needs, particularly amid a projected budget deficit of about N31.5tn.
August Auction Attracts Strong Demand
At its August bond auction, the DMO allotted N805.2bn through competitive bids across three instruments maturing in January 2035, April 2037 and June 2038.
Although the amount allocated through competitive bids fell short of the N1.1tn offered, total allotments rose to approximately N1.56tn after the DMO sold another N752.3bn through non-competitive allotments, according to Cowry Asset Management Limited.
Investor appetite remained strong, with total subscriptions reaching N1.7tn. This translated to a 2.1 times bid-to-cover ratio, up from 1.9 times at the previous auction.
The June 2038 bond attracted the strongest investor interest, receiving N821.3bn in bids against N631bn in competitive allotments. The instrument also recorded N742.3bn in non-competitive allotments.
DMO Maintains Cautious Pricing
Despite the strong demand, the DMO maintained a relatively cautious approach to pricing.
The June 2038 bond recorded a marginal yield of 17.79 per cent, while the January 2035 instrument attracted N513.6bn in subscriptions but received only N64.1bn in competitive allotments at a marginal yield of 17.15 per cent.
Analysts attributed the relatively low competitive allotments to the government’s yield considerations rather than weak investor demand.
Investors Position for Potential Yield Declines
Demand for government securities has remained strong as investors seek attractive returns while positioning for a possible decline in market yields as inflationary pressures moderate.
However, elevated yields on short-term Treasury bills have continued to influence investment decisions. This has contributed to an inverted yield curve, where shorter-dated instruments offer higher yields than some longer-term securities.
The trend reflects investors’ expectations around future interest rates and inflation, while also highlighting the continued attractiveness of short-term government securities.
Domestic Borrowing Remains Central to Fiscal Financing
The N7.62tn raised through FGN bonds does not include funds obtained through Treasury bills, Sukuk and other government debt instruments.
The figure therefore highlights the Federal Government’s continued dependence on Nigeria’s domestic capital market to finance public expenditure and bridge its substantial fiscal deficit.
With borrowing requirements remaining elevated, developments in the domestic fixed-income market are expected to remain closely watched by investors, particularly as the government balances the need to raise funds with efforts to contain borrowing costs and manage its debt burden.
