In a display of cautious fiscal strategy, the Debt Management Office (DMO) secured N798.60 billion in bond proceeds during the second quarter of 2025. The funds were raised via Federal Government of Nigeria (FGN) bond auctions held across the quarter, surpassing the N750 billion initially offered but falling short of total investor bids amounting to N1.54 trillion.
This performance represents an acceptance of just 51% of total subscriptions, suggesting a selective issuance strategy amid mixed investor sentiment and evolving economic indicators.
The DMO’s approach in Q2 marked a departure from earlier aggressive borrowing tactics, signaling a potentially shifting stance in its debt management playbook. Investment firm Parthian Limited noted that market conditions throughout the quarter were largely defined by bearish sentiment, driven by uncertainty around inflation trends and fiscal policy direction.
The fixed income market remained volatile at the quarter’s outset, with investor confidence subdued. This led to a 24 basis-point rise in average bond yields, closing April at 18.67%. However, sentiment shifted mid-quarter following the issuance of a 7-year Sukuk bond priced at 19.75%. The high-yielding offering prompted selective divestments from older Sukuk instruments as investors rebalanced their portfolios to take advantage of more attractive terms.
Subsequently, market behavior remained bearish, although by late May, demand for mid-tenor bonds began to recover. June ushered in renewed momentum as the DMO reintroduced the April 2029 bond series and launched a new 7-year issuance, prompting a wave of repositioning by investors ahead of the auction.
Parthian analysts highlighted that the June auction—featuring the new 17.95% June 2032 bond—attracted extraordinary demand. With subscriptions reaching N602 billion against a modest N100 billion offer, unmet demand spilled into the secondary market, driving yields lower on the back of sustained liquidity and improving economic sentiment, including easing inflation.
By the close of Q2, average bond yields had dropped by 63 basis points to 17.97%, with an average 70 basis-point decline observed across the curve relative to Q1 2025.
Throughout the quarter, the DMO floated N750 billion in bonds across various maturities—April 2029s, June 2032s, and May 2033s. Despite rejecting nearly half the bids, the agency successfully raised N798.6 billion, with stop rates settling at 17.75% and 17.95% for the April 2029 and June 2032 bonds, respectively.
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