(Finance Minister, Taiwo Oyedele. Photo by Punch News)
The Federal Government raised ₦5.08 trillion from the domestic bond market in the first six months of 2026, marking a 77.8 per cent increase from the ₦2.86 trillion raised during the corresponding period of 2025, according to an analysis of Debt Management Office auction results.
The increase came despite a decline in borrowing costs, with average marginal rates easing compared with last year, even as investor appetite remained strong, with subscriptions exceeding ₦9 trillion over the six-month period.
The DMO auction results showed that the Federal Government allotted ₦5.08 trillion worth of bonds between January and June 2026, compared with ₦2.86 trillion allotted during the same period in 2025, representing an increase of ₦2.22 trillion.
The figures include both competitive and non-competitive allotments disclosed in the auction results.
The government also significantly increased the amount of bonds offered to investors during the review period, offering ₦4.95 trillion worth of bonds between January and June 2026, compared with ₦1.85 trillion in the corresponding period of 2025, an increase of ₦3.10 trillion, or 167.6 per cent, reflecting a more aggressive domestic borrowing programme.
Investor demand also strengthened in nominal terms, with total subscriptions rising to ₦9.04 trillion in the first half of 2026 from ₦4.37 trillion a year earlier, an increase of about 107 per cent. However, demand moderated when measured against the size of the government’s offer.
While subscriptions were equivalent to 236.1 per cent of the amount offered in the first half of 2025, the ratio declined to 182.6 per cent in the corresponding period of 2026, suggesting that although investors committed substantially more money, the increase did not keep pace with the sharp expansion in borrowing requirements.
Further analysis of the auction data showed that investors submitted 2,823 bids across all bond auctions in the first six months of 2026, up from 1,621 bids in the corresponding period of 2025.
Successful bids also rose from 926 to 1,449 over the period, though the proportion of successful bids declined to 51.3 per cent in 2026 from 57.1 per cent in 2025, indicating that the DMO became more selective in accepting bids despite stronger participation.
The government’s monthly borrowing profile showed significant variation across the six months. January recorded the highest borrowing during the review period, with ₦1.54 trillion allotted to competitive investors and total allotments of about ₦1.68 trillion after including non-competitive allocations, compared with ₦601.04 billion in January 2025.
June followed with total allotments of ₦1.22 trillion, compared with just ₦100 billion during the corresponding month of 2025, making it one of the strongest months for domestic debt issuance.
May also witnessed a sharp increase, with ₦614.51 billion allotted through competitive bids and total allotments rising to ₦894.51 billion after the inclusion of a ₦280 billion non-competitive allocation for the 16.2499 per cent FGN April 2037 bond, compared with ₦300.69 billion raised in May 2025.
Borrowing was relatively lower in February and April. The DMO allotted ₦524.28 billion in February 2026, down from ₦910.39 billion in February 2025, while April allotments fell to ₦276.79 billion from ₦520.90 billion recorded during the corresponding period last year.
March was the only other month to record an increase, with allotments rising to ₦485.50 billion from ₦423.68 billion.
The data also point to a decline in the government’s domestic borrowing costs. Marginal rates across the various bond instruments ranged between 15.50 per cent and 18.35 per cent during the first half of 2026, compared with a range of 17.75 per cent to 22.60 per cent during the corresponding period of 2025.
The simple average marginal rate across all instruments declined to about 16.78 per cent in the first six months of 2026 from about 19.84 per cent in the same period of 2025, while the allotment-weighted average marginal rate fell to about 17.29 per cent from about 20.14 per cent.
The 22.60 per cent FGN January 2035 bond remained the government’s largest funding instrument during the review period.
Across four reopening auctions held between January and June 2026, the bond attracted subscriptions of about ₦2.30 trillion and accounted for approximately ₦1.52 trillion in allotments.
The 16.2499 per cent FGN April 2037 bond also recorded strong investor interest. Offered only in May and June, the 20-year instrument attracted subscriptions exceeding ₦1.24 trillion and total allotments of about ₦1.38 trillion, boosted by the ₦280 billion non-competitive allocation recorded in May.
Among shorter-tenor instruments, the 19.89 per cent FGN May 2033 bond attracted ₦1.34 trillion in subscriptions and ₦541.34 billion in allotments during its three reopening auctions in February and March 2026.
By contrast, 2025 auction data showed that the same bond accounted for the largest share of government borrowing during the first half of that year, raising ₦1.07 trillion, while the 18.50 per cent FGN February 2031 bond followed with ₦758.90 billion.
The figures indicate that while the Federal Government significantly expanded domestic borrowing during the first half of 2026, investor demand remained robust despite the larger supply of securities.
It was earlier reported that foreign investors channelled $3.23 billion into Nigerian bonds in the first quarter of 2026, highlighting strong appetite for the country’s fixed-income securities amid elevated interest rates and improving confidence in the foreign exchange market.
Data from the capital importation report released by the National Bureau of Statistics showed that bond investments accounted for 32.71 per cent of the $9.86 billion portfolio investments recorded during the quarter and 31.10 per cent of the total $10.37 billion capital imported into the country.
The bond inflow represented a 267.67 per cent increase from the $877.41 million recorded in the corresponding period of 2025 and a 63.76 per cent rise from the $1.97 billion attracted in the preceding quarter.
The sharp increase reflects the attractiveness of Nigerian sovereign debt instruments, which have offered among the highest yields in emerging and frontier markets following the Central Bank of Nigeria’s aggressive monetary-tightening cycle over the past two years.
Since assuming office in September 2023, CBN Governor Olayemi Cardoso has led the Monetary Policy Committee through one of the most aggressive tightening cycles in the country’s history, raising the Monetary Policy Rate from 18.75 per cent to a peak of 27.50 per cent through a series of hikes in 2024 aimed at curbing inflation, stabilising the naira and restoring investor confidence.
After holding the benchmark rate at 27.50 per cent throughout most of 2025, the committee began a cautious easing cycle in September 2025, cutting the rate by 50 basis points to 27.00 per cent as inflation moderated for several consecutive months, before lowering it further to 26.50 per cent in early 2026.
At its most recent 305th meeting in May 2026, the committee opted to retain the rate at 26.50 per cent and leave other key policy parameters unchanged, citing renewed inflationary pressures linked to global energy market disruptions while seeking to preserve the macroeconomic gains achieved through earlier tightening measures.
A renowned economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, recently warned that rising Federal Government borrowing from the domestic financial system is increasingly crowding out the private sector, as banks favour low-risk, high-yield government securities over lending to businesses.
He attributed the increase in credit to government to the financing of the fiscal deficit through the issuance of bonds and treasury bills, which banks readily buy given the attractive returns compared to lending to the real sector, and urged the government to moderate its borrowing.
In a separate conversation, he also noted that while high yields on government securities had helped draw portfolio investors, they were also increasing the burden of public debt, stressing that although the yields were helping attract portfolio investment, they were creating a huge debt-servicing burden that required a balance between improving portfolio flows and managing borrowing costs.
The economist argued that Nigeria should reduce its reliance on debt-funded public projects by expanding public-private partnerships, suggesting that government should identify commercially viable infrastructure projects and offer them to private investors rather than financing them through additional borrowing.
Market analysts predict that any significant reversal in Federal Government bond yields is unlikely to occur before the final quarter of 2026, meaning Nigerian fixed-income investors should brace for a prolonged period of high interest rates.
According to the latest macroeconomic analysis from Coronation Asset Management, a combination of sticky inflation, aggressive monetary policy and heightened fiscal pressures will keep yields firmly elevated throughout the upcoming quarter, with the firm stating in its June 2026 Economic Note that it expects FGN bond yields to remain elevated through the third quarter of 2026, with limited scope for a near-term reversal of the June repricing.
Looking ahead to the July auction, experts believe market yields have established a new baseline that will be difficult to break without an explicit shift in economic data. Coronation Research noted that its base case is for marginal rates to hold within a 17.5 to 19.0 per cent band on long-dated re-openings into the July auction, conditional on the Monetary Policy Committee maintaining its hold at its July meeting and inflation prints remaining sticky in the mid-teens.
The report cautioned that risks remain heavily tilted toward even higher yields if macroeconomic pressures intensify, noting that upside risk would come from a fourth straight inflation uptick, a weaker naira, or another large NTB auction ahead of the next bond sale.
Conversely, it noted that the window for rates to cool remains tightly restricted by the Central Bank’s policy timeline, explaining that any downside movement would require a clear, sustained lower inflation print or an easing signal from the committee, neither of which the analysts consider likely before the fourth quarter of 2026.
