Nigeria’s Bond Market Stays Hot as Government Treads Cautious Borrowing Path
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Nigeria’s federal government is tapping the brakes on domestic borrowing, even as demand for its bonds surges to historic levels. The Debt Management Office (DMO) has opted for a more restrained issuance strategy in the first quarter of 2025, in a move that suggests growing concern over rising interest costs and debt sustainability.
By February 2025, the government offered just ₦350bn across 5- and 7-year tenors. Investor demand, however, soared to ₦1.63tn—over four times the offer. Yet the DMO allotted only ₦910.39bn, holding firm to a cautious borrowing stance.
This marks a notable shift from the previous year. In February 2024, the DMO had offered ₦2.5tn in bonds—the highest monthly offer on record—and allotted ₦1.495tn. That issuance spanned the 7-year 18.50% FGN FEB 2031 and the 10-year 19.00% FGN FEB 2034 bonds, reflecting a more aggressive debt-raising strategy.
March 2025 followed the new restrained approach, with just ₦300bn offered via two bonds: a re-opening of the 5-year 19.30% FGN APR 2029 and a 9-year 19.89% FGN MAY 2033. Subscriptions reached ₦530.31bn, but only ₦423.68bn was allotted, including a significant ₦152.45bn via non-competitive bids—an indication of sustained interest from institutional investors like pension funds and insurance firms.
In Q1 2025 overall, the DMO offered ₦1.10tn, received ₦2.83tn in bids, and allotted ₦1.94tn. That’s over 70% of subscriptions accepted, but it still falls short of Q1 2024’s more aggressive posture, when ₦3.31tn was offered and ₦2.52tn allotted from ₦3.12tn in bids—an 80.8% acceptance rate.
The shift reflects a deliberate recalibration. The smaller offer size in 2025 suggests a moderation in borrowing appetite, potentially linked to the burden of rising yields. Marginal interest rates had soared in January 2025 to between 21.79% and 22.60%, compared with 15.00%–16.50% in January 2024. By March, however, they had eased to 19.00%–19.99%, hinting at possible stabilisation and improved market confidence in macroeconomic management.
Institutional investors continue to show a clear preference for medium- to long-term government securities. The 7- and 10-year bonds remain most popular—ideal for pension fund administrators and insurers managing long-term liabilities.
Analysts say the DMO’s strategy also reveals a tactical pivot: issuing fewer instruments per auction while deepening liquidity in existing ones through re-openings. This helps strengthen price discovery in the secondary market and simplifies debt management by avoiding an overly fragmented portfolio.
This measured borrowing strategy comes against the backdrop of a wider fiscal debate over Nigeria’s rising public debt. While the government continues to rely on domestic markets, it is also expanding its listings. In March, the Nigerian Exchange announced the supplementary listing of 910.3 million units of February 2025 bonds—305.36 million units of the 19.30% APR 2029 bond and 605.03 million units of the 18.50% FEB 2031 bond.
The additional issuance takes the outstanding APR 2029 bond to 768.52 million units and the FEB 2031 bond to 2.71 billion units—reflecting the DMO’s focus on consolidating benchmark bonds.
While some financial experts, including those at Afrinvest, have raised alarm bells over Nigeria’s debt trajectory, the International Monetary Fund (IMF) has taken a more tempered view. During a recent visit, IMF First Deputy Managing Director Gita Gopinath classified Nigeria’s debt level as “moderate,” not high-risk.
“We assess debt sustainability for countries every year,” Gopinath noted. “For Nigeria, our 2024 assessment showed the risk of sovereign stress is moderate.” Still, she warned that this is no licence for profligacy, urging continued fiscal prudence.
In this context, the DMO’s tighter borrowing strategy in 2025 may be less about declining market appetite and more about deliberately managing risk in an era of elevated rates. The appetite for Nigerian government debt remains robust—what’s changing is the government’s willingness to indulge it.
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