Nigeria’s domestic bond market witnessed unprecedented demand in September 2025, as the Federal Government’s monthly auction recorded a 530% oversubscription, even amid a cut in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria (CBN).
According to the Debt Management Office (DMO), total bids hit N1.26 trillion against the N200 billion initially offered, marking a significant leap from August’s N268.16 billion. Allotments also surged to N576.62 billion, more than four times the N136.16 billion recorded in the previous month.
Investors Target 7-Year Bonds
The auction featured two reopenings: the 17.945% FGN AUG 2030 (5-year) and the 17.95% FGN JUN 2032 (7-year), each with an offer size of N100 billion. Investor appetite leaned heavily toward the 7-year bond, which attracted N1.03 trillion in subscriptions compared to just N165.81 billion in August. The 5-year bond also saw bids rise to N231.79 billion, more than double the previous month’s N102.36 billion.
This translated into a bid-to-offer ratio of 6.3 times, highlighting excess liquidity in the financial system and limited alternatives for high-yielding investments.
Allotments Quadruple
The DMO allocated N576.62 billion across both tenors, with the 7-year bond receiving the lion’s share at N488.83 billion—up from N90.16 billion in August. The 5-year tenor saw allotments rise to N87.80 billion compared to N46.01 billion in the prior month.
This reflects the government’s preference for raising funds through longer-dated securities while balancing financing needs with yield management.
Yields Trend Lower
Despite the overwhelming demand, stop rates moderated. The 5-year cleared at 16.00%, down from 17.945% in August, while the 7-year tenor settled at 16.20%, compared to 18.00% previously.
Bid ranges also tightened, signaling more clarity in investor expectations. The 5-year paper, which had a bid range of 12.50%–21.50% in August, narrowed to 15.00%–17.95% in September. Similarly, the 7-year bond compressed from 15.00%–22.00% to 14.95%–19.20%.
Rate Cut and Market Sentiment
The record subscriptions came just days after the CBN reduced the MPR from 27.5% to 27%, its first rate cut since 2020. The decision followed five consecutive months of slowing inflation, which eased to 20.12% in August from 22.64% in March.
To maintain monetary discipline, the CBN paired the rate cut with stricter liquidity measures, including a steeper 75% cash reserve requirement on non-TSA public deposits and a narrower interest rate corridor.
Analysts say the September auction reflects investor optimism about Nigeria’s macroeconomic outlook, with strong confidence in lower inflation and more accommodative monetary policy in the months ahead.
