Investors are set to test appetite for long-dated Nigerian sovereign debt today as the Debt Management Office (DMO) returns to the domestic market with a N600 billion bond reopening anchored by its benchmark 22.60 percent January 2035 paper. pressures.
The auction, scheduled for Monday, May 18, features two reopened Federal Government of Nigeria (FGN) bonds consisting of a N300 billion 22.60 percent FGN January 2035 bond and a N300 billion 16.2499 percent FGN April 2037 bond, with settlement slated for May 20.
The offering reinforces the federal government’s dependence on domestic debt markets at a time of elevated interest rates, tight monetary conditions and sustained liquidity management by the Central Bank of Nigeria (CBN).
The 22.60 percent FGN January 2035 instrument, which has emerged as Nigeria’s dominant long-dated benchmark security, is returning to the market for the fifth reopening cycle since December 2025.
Under the reopening structure, coupon rates remain fixed while investors bid based on the yield-to-maturity they are willing to accept. Successful bidders will therefore pay prices corresponding to the clearing yield plus accrued interest.
The bonds offer semi-annual coupon payments, with principal repaid in full at maturity.
One of the most striking features of today’s auction is the yield disparity between the two instruments.
The shorter-dated 10-year bond carries a significantly higher coupon of 22.60 percent compared with 16.2499 percent on the longer-dated 20-year paper.
Ordinarily, longer-tenor bonds command higher yields to compensate investors for extended duration risk. However, persistent monetary tightening, inflation concerns and elevated short-to-medium term funding costs have reversed that traditional relationship in Nigeria’s fixed income market.
The development reflects broader investor caution over near-term macroeconomic risks, including inflationary pressures, exchange rate uncertainty and elevated Treasury market rates.
The bonds are being issued at N1,000 per unit with a minimum subscription of N50.001 million, underscoring their institutional investor focus.
The securities are backed by the full faith and credit of the Federal Government and retain several regulatory advantages that continue to support strong demand.
They qualify as trustee investment securities under the Trustee Investment Act, are recognised as government securities under both the Companies Income Tax Act (CITA) and Personal Income Tax Act (PITA), and remain exempt from taxes for pension funds and other qualified institutional investors.
The instruments are also listed on the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange, ensuring secondary market tradability and price transparency.
For banks, the bonds additionally qualify as liquid assets for liquidity ratio calculations, widening their attractiveness across the financial system.
Heavy domestic borrowing persists
Today’s sale extends a sustained run of aggressive domestic borrowing by the Federal Government through reopened bond auctions.
The DMO has consistently returned to the domestic market since late 2025 as fiscal authorities seek to bridge funding gaps while avoiding excessive reliance on external borrowing amid volatile global financing conditions.
The most aggressive outing came in January 2026, when investor demand increased and total allotments reached N1.54 trillion against an initial N900 billion offer.
That auction saw strong oversubscription across all reopened instruments, including the same 22.60 percent January 2035 bond now returning to market.
By February, borrowing costs showed early signs of moderation as the DMO raised N800 billion through three reopened bonds at yields below the 20 percent threshold.
In April, the agency returned with another N700 billion reopening exercise, again anchored by the 22.60 percent January 2035 instrument.
Today’s N600 billion offer therefore confirms the bond’s emergence as the government’s preferred benchmark instrument in the current high-rate environment.
Market participants expect robust institutional participation at today’s auction, driven by pension funds, banks, asset managers and insurance firms seeking relatively attractive real returns amid elevated system liquidity.
While the DMO’s reopening strategy has helped deepen market liquidity and improve benchmark pricing efficiency, the continued dependence on double-digit domestic borrowing highlights the difficult balance between financing fiscal deficits and containing the government’s rising interest burden.
For investors, however, the reopening offers another opportunity to lock into some of the highest sovereign yields currently available in Nigeria’s fixed income market.
As bidding opens today, attention will focus on the eventual stop rates and subscription levels, which are expected to provide fresh signals on investor sentiment, liquidity conditions and expectations for the interest rate environment in the months ahead.
