Nigeria’s Bond Rates Projected to Rise after 65% Subscription Drop
The Federal Government of Nigeria, through the Debt Management Office (DMO), is set to reopen local bonds for subscription across 5-, 7-, and 10-year tenors today.
The total offer of N700.00 billion debt notes will be offered after a significant slowdown in investor subscriptions at the primary market auction in March.
Details from the auction circular revealed that issuance remains skewed toward the belly of the curve, with N300.00 billion on the AUG-2030 (5-year), N100.00 billion on the JUN-2032 (7-year), and N300.00 billion on the JAN-2035 (10-year) papers.
In Q1, auction size moderated progressively from N900.00 billion in January to N800.00 billion in February and N750.00 billion in March.
The size remained elevated relative to historical levels; for context, the highest monthly offer size recorded in 2025 was N450.00 billion, Meristem Securities Limited said in a note.
At the March auction, the government reopened the 17.95% AUG 2030, 17.95% JUN 2032, and 19.89% MAY 2033 instruments. Notably, the 17.95% JUN 2032 and 19.89% MAY 2033 bonds had also been reopened in February.
The investment firm Meristem Securities told investors in a note that, while pricing across the reopened instruments remained firmly below their original issue levels, March clearing rates were higher than those in February.
The 17.95% JUN 2032 and 19.89% MAY 2033 bonds cleared at marginal rates of 16.15% and 16.64%, respectively, compared with the identical 15.74% clearing rate recorded in February.
Fixed income market analysts said this translates to declines of 180bps and 325bps, respectively, from their original issue rates, compared with 215bps and 415bps in the prior auction. Similarly, the 17.95% AUG 2030 bond cleared at 16.00%, representing a 195bps decline from its original issue rate.
Investor participation at the March FGN bond auction was the weakest of the quarter, with total subscriptions declining sharply to N931.51 billion, compared with N2.25 trillion in January and N2.70 trillion in February.
Meristem said, “We attribute the 65.49% month on month decline in subscription levels largely to the lower rates recorded at the February auction, which likely dampened investor appetite heading into March and led to the higher clearing rates”.
Demand remained concentrated at the long end of the curve, with the 19.89% MAY 2033 bond emerging as the focal point of investor interest. The instrument attracted N462.21 billion, accounting for 49.62% of total subscriptions, from 32.41% in February.
In line with the weaker demand profile, total allotments declined to N485.48 billion from N524.00 billion in February, while the bid-to-cover ratio moderated significantly to 1.92x, compared with 5.15x in the previous auction, when the government faced exceptionally strong demand but maintained a relatively conservative allotment strategy in a bid to manage borrowing costs.
Secondary market performance has remained bearish since the last auction on March 30, with average yields rising by 18bps to 15.94% from 15.76%.
Fixed-income market analysts at Meristem Securities believe this trend reflects heightened investor caution amid US–Iran tensions and concerns about the potential inflationary implications for Nigeria.
“The upcoming DMO bond auction is likely to clear at higher rates, as investors are expected to price in a potentially stronger April inflation figures, driven by the pass-through effects of oil price volatility and the US-Iran tensions.
“Although system liquidity stands at N3.97 trillion as of April 24, about N3.89 trillion is held in SDF balances, suggesting that most of the liquidity is parked with the CBN and may not translate into strong auction demand.
“In addition, the re-opened 17.95% AUG 2030 and 17.95% JUN 2032 bonds, which were also offered in March, are currently trading above their March clearing rates, reinforcing expectations for higher stop rates at the upcoming auction, particularly as the offer size remains relatively elevated”, Meristem said.
