Attractive Yield, Confidence Fuel Demand as Investors StakeN4.67trn on FGN Bond

Kayode Tokede

The Federal Government of Nigeria (FGN) bonds attracted N4.67 trillion total subscription in seven months of 2025, helped by continued investor confidence, attractive yields and Nigeria’s stable credit ratings.

However, the N4.67 trillion total subscription in seven months of 2025 is about 9.9per cent below the N5.18 trillion total subscription reported by the debt office in seven months of 2024.

The auction results released by the Debt Management Office (DMO) showed that the federal government in the period under review allotted an estimated N4.09 trillion as against the N1.93 trillion on offer during the period.

THISDAY gathered that the N4.09 trillion allotted is 6.02 per cent below the N4.35 trillion allotted in seven months of 2024.

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

The DMO yesterday announced the successful completion of its FGN bond auction, with a total of N185.9 billion successfully allotted across two re-opened bond offerings.

The auction, held on July 28, 2025, featured the re-opening of two previously issued FGN bonds: N20 billion for the 19.30% FGN APR 2029 bond with a five-year tenor, and N60 billion for the 17.95% FGN JUN 2032 bond with a seven-year maturity.

According to DMO numbers, the auction garnered N39.075 billion in total subscriptions for the 5-Year FGN APR 2029 bond and an impressive N261.597 billion for the 7-Year FGN JUN 2032 bond.

Out of these bids, the DMO allotted N13.430 billion for the APR 2029 bond and N172.502 billion for the JUN 2032 bond—amounting to a total allotment of N185.932 billion, well over the initial offer size.

While the bonds retained their original coupon rates of 19.30 per cent and 17.95per cent respectively, they were allotted at marginal rates of 15.69per cent for the 5-Year bond and 15.90per cent for the 7-Year bond. This reflects a decline in yield expectations, possibly indicating that investors anticipate easing inflationary pressures or a stable monetary policy environment in the medium term.

The bond re-openings attracted a total of 149 bids—40 for the 2029 maturity and 109 for the 2032 maturity. Of these, 74 bids were successful (15 and 59 respectively).

According to DMO, 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.

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.

But 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 modest   participation in seven months of 2025 auction suggests that large institutional investors, such as pension funds and asset managers, had excess liquidity to deploy, further compressing yields.

According to market analysts, the strong demand for FGN bond is due to attractive yieldstressing that the oversubscriptions also revealed that investors have confidence in the federal government’s ability to meet its debt obligations.

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-to1market, 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.”