The Federal Government has raised N7.62 trillion through the domestic bond market between January and August 2026, highlighting the growing role of borrowing in financing government spending and managing its fiscal obligations.
The funds were generated through eight Federal Government of Nigeria bond auctions organised by the Debt Management Office (DMO) during the first eight months of the year.
The latest borrowing comes as the government faces a projected budget deficit of about N31.5 trillion, making domestic and international financing important sources of funding for its spending plans.
At the August bond auction, the DMO offered investors bonds across three different maturities: January 2035, April 2037 and June 2038.
The government initially offered N1.1 trillion through competitive bidding but allotted N805.2 billion through that channel. It subsequently raised the total amount allotted to about N1.56 trillion after another N752.3 billion was sold through non-competitive allotments, according to Cowry Asset Management.
Investor appetite remained strong during the auction. Total subscriptions reached approximately N1.7 trillion, meaning investors offered more money than the government initially planned to raise.
The auction produced a bid-to-cover ratio of 2.1 times, up from 1.9 times at the previous auction. The ratio indicates the level of investor demand compared with the amount offered by the government.
The June 2038 bond attracted the strongest interest among the instruments on offer. Investors submitted bids worth approximately N821.3 billion, while competitive allotments stood at N631 billion. The bond also recorded about N742.3 billion in non-competitive allotments.
However, the government remained cautious about the interest rates it was willing to pay. The June 2038 bond recorded a marginal yield of 17.79 per cent, while the January 2035 bond had a marginal yield of 17.15 per cent.
The January 2035 instrument attracted subscriptions worth about N513.6 billion, but only N64.1 billion was allotted through competitive bidding.
Market analysts said the relatively smaller competitive allotments did not necessarily indicate weak investor demand. Instead, they suggested that the DMO was being careful about the yields it accepted as it manages the cost of servicing the country’s debt.
Government bonds have remained attractive to investors because they offer relatively high returns and are generally regarded as lower-risk investments compared with many private-sector securities.
Investors are also watching inflation closely. With inflation showing signs of moderation, some market participants expect interest rates and bond yields to decline eventually. This has encouraged some investors to lock in current yields through longer-term government securities.
However, short-term Treasury bills continue to compete strongly for investors’ money because some of them offer higher yields than longer-dated instruments. This has contributed to an inverted yield curve, where short-term securities can provide better returns than some longer-term bonds.
The N7.62 trillion raised through FGN bonds represents only part of the government’s domestic borrowing activities. It excludes funds raised through Treasury bills, Sukuk and other debt instruments.
The continued reliance on the domestic capital market shows how important local investors have become to government financing. While borrowing provides funds for public expenditure, it also increases the government’s debt-servicing responsibilities, making the cost and structure of future borrowing an important issue for Nigeria’s finances.
