Yields on Nigerian government bonds edged lower in the secondary market following an unexpected move by the Debt Management Office (DMO) during its latest bond auction, catching many investors off guard.
Trading activity in the fixed income space remained mixed throughout the session. While short-dated maturities saw little action, some mid-tenor bonds experienced mild selling pressure, leading to slight yield increases. In contrast, strong buying interest at the long end of the curve contributed to a broader decline in yields. Overall, the average bond yield slipped marginally by 1 basis point on the day.
Market participants reacted to the DMO’s primary market auction, where the agency offered N80 billion worth of bonds—below the usual N100 billion offer. The smaller issuance reflects the federal government’s current tilt away from relying heavily on domestic borrowing to fund its budget deficit.
Among the instruments offered, the 2032 sovereign bond was particularly popular, attracting bids worth N261 billion. The auction results revealed that marginal clearing rates dropped sharply to 15.69% and 15.90%. Despite the lower offer, the DMO ended up allocating N185.93 billion—a move that defied its recent conservative approach and surprised market watchers.
CardinalStone Securities, in a post-auction commentary, noted that the DMO’s decision to oversell signals a shift in issuance strategy, potentially influenced by stronger-than-expected demand and prevailing yield dynamics.
According to the firm’s H1 2025 economic outlook, the federal government has raised a net N3 trillion through FGN bonds and Treasury bills in the first six months of the year. However, it may need to raise an additional N10.08 trillion in the second half to cover the budget shortfall.
While Nigeria leaned heavily on local borrowing in early 2025, analysts anticipate a pivot toward international financing in the latter half. The federal government is reportedly planning to secure $1.2 billion via the DMO and an additional $2 billion from concessional loans through multilateral channels to close the deficit gap.
