Nigeria’s domestic debt market came alive in September as investors piled into Federal Government bonds, oversubscribing the monthly auction by a staggering 530%, even as the Central Bank of Nigeria (CBN) trimmed interest rates.
According to figures released by the Debt Management Office (DMO), the government had initially offered N200 billion worth of bonds but ended up receiving bids totalling N1.26 trillion. In response to the overwhelming demand, authorities allotted N576.62 billion—more than four times the N136.16 billion issued in August.
The auction featured two instruments: the 5-year FGN AUG 2030 and the 7-year FGN JUN 2032, both of which attracted frenzied interest. While the 5-year bond drew N231.79 billion in subscriptions, the 7-year series was the star of the auction, soaking up over N1 trillion in bids.
Despite the flood of demand, yields actually moderated. Stop rates on the 5-year dropped to 16.00% from 17.95% in August, while the 7-year tenor settled at 16.20%, down from 18.00% the previous month. Analysts say this reflects renewed investor confidence in Nigeria’s macroeconomic outlook, following five straight months of easing inflation and the CBN’s first rate cut since 2020, which lowered the Monetary Policy Rate (MPR) to 27%.
“This level of oversubscription signals both strong liquidity in the system and a lack of alternative high-yielding instruments,” one Lagos-based investment manager explained. “Investors are betting on continued disinflation and a stable interest rate environment.”
While policymakers see the record demand as a vote of confidence, critics caution that Nigeria’s overreliance on debt markets risks starving the real economy of capital. Calls are growing for reforms to deepen corporate and infrastructure debt markets and reduce government borrowing.
For now, though, the Federal Government has secured another round of funding at relatively lower rates, buoyed by investor appetite that shows no signs of slowing.
