To Bride Budget Deficit, FG Raised N2.86trn in H1 2025 viaBond Market

Kayode Tokede

Following the need to bridge the 2025 budget deficit, the federal government through the Debt Management Office (DMO), raised a sum of N2.86 trillion from the Bond market in the first half (H1) of 2025, THISDAY analysis of trading numbers has revealed

While the debt office in the period offered to raise N1.85 trillion, total subscription crossed the N4trillion mark to N4.37 trillion to underline demand for government risk-free instrument.

The government in H1 2024, raised a sum of N4.13 trillion from the Bond market out of the N4.66 trillion offered to the investing public.

In H1 2024, the total subscription nearly reached the N5trillion mark to N4.89 trillion as investors were aggressively partaking in government security to hedge against double inflation rate and unstable naira at the foreign exchange market.

The federal government projected to borrow approximately N13 trillion via FGN bonds in 2025 to finance its projected budget deficit, with a significant portion expected to be raised in the first half through a mix of new and re-opened bonds.

DMO in its latest FGN auction result for June 2025 said it successfully allotted a total of N100 billion (across two re-opening issues— 19.30% FGN APR 2029 (Re-opening, 5-Year Bond) & 17.95% FGN JUN 2032 (NEW, 7-Year Bond).

The DMO in its announcement revealed that a total of N100 billion was successfully allotted across two bond offerings.

The auction, held on Monday, June 23, 2025, featured two separate bonds with face values of N50 billion each.

The first instrument offered was a five-year re-opening bond with a coupon rate of 19.30per cent, set to mature on April 17, 2029. The bond attracted 30 bids totalling N41.685 billion in subscriptions, signalling strong investor demand. However, only two bids were successful, with a final allotment of N1.050 billion.

The second instrument, a newly issued seven-year bond carrying a 17.95 per cent coupon rate and maturing on June 25, 2032, garnered 209 bids, with subscriptions amounting to N561.170 billion. Out of these, 41 bids were accepted, and N98.950 billion was allotted.

This brought the total funds raised through the auction to N100 billion, aligning with the DMO’s stated target.

Despite the marginal rate for the five-year bond being lower than the coupon rate, the DMO clarified that the original coupon rate of 19.30% will remain in effect.

Each unit of the bonds is priced at N1,000, with a minimum subscription amount of N50,001,000. Additional subscriptions must be made in multiples of N1,000.

Although the coupon rates are predetermined, successful bidders at the auction pay a price based on the yield-to-maturity that clears the offered volume, along with any accrued interest from the last interest payment date up to the settlement date.

Interest on both bonds is payable semi-annually, providing bondholders with regular income during the tenor of the instruments.

The bonds will be repaid in full on their respective maturity dates through bullet repayment, meaning the principal will be paid back in a single lump sum.

According to the DMO, the bonds were issued as part of the government’s strategy to finance the 2025 national budget and manage public debt obligations through domestic borrowing.

The FGN bond continues to attract strong participation as Nigerians seek safer and more predictable returns amid broader market uncertainties.

FGN bond is issued with a minimum subscription of N50,001,000.00 + multiple of N1,000.00 thereafter.

Before now, DMO in the January 2025 auction had successfully raised a total of N669.94 billion, with N601.03 billion allotted across three bond tenors. The debt management had sought investors’ support to raise N450 billion.

The January 2025 FGN bond auction had marked another significant milestone in the government’s bid to finance critical infrastructure projects and support budgetary needs through domestic borrowing

The DMO said the robust subscription levels highlight continued investor confidence in the government’s debt instruments, driven by attractive yields and Nigeria’s stable credit ratings.

Experts stated that the lower bond yields typically indicate that investors perceive reduced risks and are willing to accept lower returns in exchange for safety.

Also, the strong participation in first half of 2025 auction suggests that large institutional investors, such as pension funds and asset managers, had excess liquidity to deploy, further compressing yields.

Meanwhile, analysts stated that the strong demand for FGN bond to attractive yield, which offers investors high returns on their investments, stressing that the oversubscriptions also revealed that investors have confidence in the federal government’s ability to meet its debt obligations.

Speaking, the Vice President, HighcapSecurities Limited, Mr David Adnori said that the federal government notified the general public of borrowing more 2025 with the size of the budget.

He said, “With all the volatility and foreign exchange issues, it makes sense to borrow at the domestic market rather than borrowing from the international market. It is all a reflection of our macroeconomic environment challenges and weak fiscal policy of the government.

“All this borrowing also is a reflection of the weak financial position of the government and it will continue like that this year.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.”

Also, analysts at Coronation in a report titled, “2025 Year Ahead,” said “As we have seen, there was considerable pain in the bond market during the period from 2020 onwards, including 2024.Taking the Bloomberg Nigerian Local Currency Sovereign Absolute Return Index, which is based on a selection of medium and long-dated FGN bonds, recent returns have been poor. The index has returned just 10.8per cent in Naira over the past two years and a meagre 1.4per cent, mark-to-market, in 2024.

2025 could see a reversal in fortunes, in our opinion. If, as we expect, the monetary authorities succeed in bringing inflation under control as the year progresses, with the chances of this increasing in Q4 2025 in our view, then there will be scope for the MPR to be cut and T-bill rates to fall.

“If this happens then we would see a rally in the FGN bond market. While bond rates were going up in 2024 it made sense to cut exposure to long durations and to increase exposure to short durations.The reverse would be true if market interest rates start to fall in 2025 and risk-tolerant investors would buy long-dated FGN bonds. Bond rallies are often associated with currency appreciation. If our optimistic scenario with regard to the Naira/US dollar exchange rate is realised, then this could itself point to a bond market rally.

“But, even if there is no actual Naira/US dollar appreciation in 2025, which is what our base case sets out, we believe that there would still be potential for a bond market rally if inflation is brought under control and the CBN is able to cut rates.”