The Federal Government has raised N7.62 trillion through the domestic bond market in the first eight months of 2026, highlighting its growing dependence on local borrowing to meet rising fiscal financing needs.
The funds were mobilised through eight Federal Government of Nigeria bond auctions conducted by the Debt Management Office (DMO) between January and August.
The borrowing comes against the backdrop of a projected budget deficit of about N31.5trillion, with the government increasingly relying on the domestic capital market to bridge its financing gap and meet other fiscal obligations.
At the August auction, the DMO offered N1.1tn across three FGN bonds but allotted N805.2bilion through competitive bids.
An additional N752.3bn was allotted through the non-competitive window, taking total allotments at the auction to about N1.56 trillion, according to Cowry Asset Management Limited.
Investor Demand Remains Strong
Despite the government’s cautious approach to pricing, investor appetite for government securities remained strong.
Total subscriptions stood at N1.7trillion, translating to a bid-to-cover ratio of 2.1 times, higher than the 1.9 times recorded at the previous auction.
The June 2038 bond recorded the strongest demand, attracting N821.3bn in bids against N631billion in competitive allotments. It also received N742.3billion through non-competitive allotments.
The January 2035 bond attracted N513.6bn in subscriptions but secured only N64.1billion in competitive allotments at a marginal yield of 17.15 per cent.
The June 2038 instrument recorded a marginal yield of 17.79 per cent.
Analysts said the relatively low competitive allotments reflected the DMO’s yield considerations rather than a lack of investor interest.
Short-Term Securities Still Attractive
The strong demand for government bonds comes as investors continue to seek high-yielding assets amid expectations that moderating inflation could eventually trigger a decline in market yields.
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However, attractive returns on short-term Treasury bills have continued to draw investor attention, contributing to an inverted yield curve where some shorter-dated instruments offer higher yields than longer-term securities.
The development presents a financing advantage for the government in the short term but also underscores the importance of managing borrowing costs as domestic debt continues to expand.
The N7.62trillion raised through FGN bonds does not include funds generated through Treasury bills, Sukuk and other debt instruments, indicating that the government’s overall domestic financing programme is substantially larger.
With the fiscal deficit still elevated, the Federal Government is expected to remain an active participant in the domestic capital market as it seeks to fund its spending commitments.
