DMO Hikes Interest Rates on Nigerian Government Bonds
The Debt Management Office (DMO) hiked spot rates on Federal Government of Nigeria (FGN) bonds at the monthly auction conducted on Monday.
The auction results revealed that the DMO raised N1.21 trillion at higher spot rates during the reopening of Nigerian naira-denominated local bonds, aimed at patching the 2026 budget deficit.
Reflecting investors’ apathy at the auction, the DMO increased spot rates despite disinflationary conditions in the debt market. Investors are demanding a higher return on the naira as real returns have fallen following the Monetary Policy Committee’s dovish stance.
Inflation dropped to 14.63% in September, the same month the Central Bank reduced the benchmark interest rate to 23%, leaving the real return on investment below 8.4%.
Today, the authority opened N1.75 trillion worth of local bonds for subscription across three tenors, targeting N500 billion, N800 billion, and N450 billion for Feb 2034, Sept 2036, and Jun 2038, respectively, reopening FGN bonds.
The monthly bond auction for Oct was undersubscribed, with total subscription settling at N1.747 trillion, slightly below the N1.75 trillion supply plan.
Demand for Feb 2034 FGN bond was the weakest, settling at N304.08 billion, an amount below N500 billion the authority had targeted to raise. The DMO allotted just N78.36 billion at the rate of 16.99%, up from 15.50% at the previous action.
The FGN bond expiring in Sept 2026 attracted N925.35 billion in subscriptions from investors in the debt market, exceeding the N800 billion offer size. The DMO sold N781.31 billion of the subscription record at a rate of 17.29%, up from 16.79% at the previous auction.
The 15-year reopening FGN bond was also oversubscribed, with total bids amounting to N518.32 billion at the auction, higher than the N450 billion targeted for subscription.
The Debt Office approved N350.72 billion for the allotment of long-duration naira-denominated local bonds at a rate of 17.19%, up from 16.85% offered in the previous action.
DMO Cuts Nigerian Government Bond Rates as Real Return Widens
