Budget Deficit: FG Raises N3.6trn via Bond Market in Five Months
Kayode Tokede
Buoyed by drive to bridge budget deficit, the federal government, through the Debt Management Office (DMO), raised an estimated N3.6 trillion from investors in five months of 2026 using the FGN Bond.
The N3.6 trillion FGN Bond raised between January and May 2026 is against a backdrop of sustained government reliance on the domestic debt market to fund fiscal obligations amid constrained external financing conditions.
The N3.6 trillion raised in five months of 2026 is about 51.5 per cent increase when compared to N2.66 trillion raised in the five months of 2025.
Despite the cut in yield, the total investors subscription stood at N7.63 trillion in five months of 2026, representing an increase of 106 per cent from N3.7 trillion declared by the debt office in five months of 2025.
The debt office offer stood at N3.75 trillion which is about 114.3 per cent increase over the N1.75 trillion offered in the five months of 2025 but eventually settled for N3.6 trillion.
The N7.63 trillion total subscription in the five months of 2026 is a reflection that investors, most especially the Pension Fund Administrators (PFAs), tend to invest in risk-free instruments, of which FGN Bond and Nigerian Treasury Bills (NTB) offer to the investing public.
PFAs and fund managers have played a critical role in the success of FGN bonds over the years.
Since the beginning of the year, the DMO has continually re-opened some FGN Bonds amid modest interest rates in its moves to attract investors.
Insight into the latest FGN Auction for May 2026 showed that DMO reopened the JAN-2035 and APR-2037 bonds, offering a total of N600.00 billion to the investing public.
Total subscription (non-competitive bid) settled at N796.17 billion (bid-to-offer: 0.9x), with the DMO eventually allotting N614.5 billion (bid-to-cover: 1.5x). The stop rate on the JAN-2035, which was on-the-run last month, expanded by 41basis points to 17.00%. While the stop rate on the APR-2037 printed 17.04%
Also, the FGN ’s April 2026 bond auction attracted a total of N948 billion in bids—well above the N700 billion offered—across three maturities for the months of April 2026.
According to the DMO, the auction was conducted on April 27, 2026 and covered the re-opening of the 17.945% FGN August 2030 bond, the 17.95% FGN June 2032 bond, and the 22.60% FGN January 2035 bond.
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.
