Investors turned their attention to Nigeria’s secondary bond market this week after the Debt Management Office (DMO) offered fewer securities than expected at its latest auction, leaving yield-hungry asset managers to seek alternatives in the open market.
The renewed demand for Federal Government of Nigeria (FGN) bonds pushed benchmark yields slightly lower, as traders capitalized on the attractive pricing of existing issues. Market analysts say the buying momentum reflects growing confidence in the local debt market, amid expectations that the Central Bank of Nigeria (CBN) could deliver one final interest rate cut before year-end 2025.
The optimism follows steady disinflation trends and a firmer naira, although analysts caution that a rate adjustment could narrow banks’ net interest margins. Average yields in the secondary market dropped by 3 basis points to 15.87%, compared with the prevailing inflation rate of 18.02%.
At last week’s auction, the DMO reopened the August 2030 (5-year) and June 2032 (7-year) bonds, offering ₦260 billion in total. Despite overwhelming demand totaling ₦1.06 trillion — a bid-to-offer ratio of 4.07 times — the DMO allotted only ₦313.78 billion, translating to a bid-to-cover ratio of 3.37 times.
Investors showed a stronger preference for longer-dated securities, while stop rates eased by 17 and 35 basis points to 15.83% and 15.85% respectively. Analysts say this reflects the government’s continued effort to manage borrowing costs and control debt service pressures.
Looking ahead, fixed-income traders expect activity in the bond market to remain buoyant ahead of the October supply calendar. Many investors are positioning strategically in anticipation of the next Monetary Policy Committee (MPC) meeting, which could influence short- and long-term yield movements.
Analysts at several investment firms noted that the combination of steady inflation moderation, robust liquidity, and attractive real returns may sustain investor appetite for naira-denominated assets in the coming months.
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