The Federal Government raised N5.08tn from the domestic bond market in the first six months of 2026, marking a 77.8 per cent increase from the N2.86tn raised during the corresponding period of 2025, an analysis of Debt Management Office auction results by The PUNCH has shown.
The increase came despite a decline in borrowing costs, with average marginal rates easing compared with last year, even as investor appetite remained strong, with subscriptions exceeding N9tn over the six-month period.
The DMO auction results showed that the Federal Government allotted N5.08tn worth of bonds between January and June 2026, compared with N2.86tn allotted during the same period in 2025, representing an increase of N2.22tn. The figures include both competitive and non-competitive allotments disclosed in the auction results.
The government also significantly increased the amount of bonds offered to investors during the review period. Between January and June 2026, it offered N4.95tn worth of bonds, compared with N1.85tn in the corresponding period of 2025. This represents an increase of N3.10tn, or 167.6 per cent, reflecting a more aggressive domestic borrowing programme.
Investor demand also strengthened in nominal terms. Total subscriptions rose to N9.04tn in the first half of 2026 from N4.37tn a year earlier, an increase of N4.67tn or about 107 per cent.
However, demand moderated when measured against the size of the government’s offer. While subscriptions were equivalent to 236.1 per cent of the amount offered in the first half of 2025, the ratio declined to 182.6 per cent in the corresponding period of 2026. This suggests that although investors committed substantially more money, the increase did not keep pace with the sharp expansion in borrowing requirements.
A further analysis of the auction data showed that investors submitted 2,823 bids across all bond auctions in the first six months of 2026, up from 1,621 bids in the corresponding period of 2025.
Successful bids also increased from 926 to 1,449 over the period. However, the proportion of successful bids declined to 51.3 per cent in 2026 from 57.1 per cent in 2025, indicating that the DMO became more selective in accepting bids despite stronger participation.
The government’s monthly borrowing profile showed significant differences across the six months. January recorded the highest borrowing during the review period, with N1.54tn allotted to competitive investors and total allotments of about N1.68tn after including non-competitive allocations, compared with N601.04bn in January 2025.
June followed with total allotments of N1.22tn, compared with just N100bn during the corresponding month of 2025, making it one of the strongest months for domestic debt issuance.
May also witnessed a sharp increase, with N614.51bn allotted through competitive bids and total allotments rising to N894.51bn after the inclusion of a N280bn non-competitive allocation for the 16.2499 per cent FGN April 2037 bond. This compares with N300.69bn raised in May 2025.
Borrowing was relatively lower in February and April. The DMO allotted N524.28bn in February 2026, down from N910.39bn in February 2025, while April allotments fell to N276.79bn from N520.90bn recorded during the corresponding period last year.
March was the only other month to record an increase, with allotments rising to N485.50bn from N423.68bn.
The data also point to a decline in the government’s domestic borrowing costs. Marginal rates across the various bond instruments ranged between 15.50 per cent and 18.35 per cent during the first half of 2026. In comparison, marginal rates ranged from 17.75 per cent to 22.60 per cent during the corresponding period of 2025.
The simple average marginal rate across all instruments declined to about 16.78 per cent in the first six months of 2026 from about 19.84 per cent in the same period of 2025. Similarly, the allotment-weighted average marginal rate fell to about 17.29 per cent from about 20.14 per cent.
The 22.60 per cent FGN January 2035 bond remained the government’s largest funding instrument during the review period. Across four reopening auctions held between January and June 2026, the bond attracted subscriptions of about N2.30tn and accounted for approximately N1.52tn in allotments.
The 16.2499 per cent FGN April 2037 bond also recorded strong investor interest. Offered only in May and June, the 20-year instrument attracted subscriptions exceeding N1.24tn and total allotments of about N1.38tn, boosted by the N280bn non-competitive allocation recorded in May.
Among shorter-tenor instruments, the 19.89 per cent FGN May 2033 bond attracted N1.34tn in subscriptions and N541.34bn in allotments during its three reopening auctions in February and March 2026.
In contrast, the 2025 auction data showed that the 19.89 per cent FGN May 2033 bond accounted for the largest share of government borrowing during the first half of the year, raising N1.07tn, while the 18.50 per cent FGN February 2031 bond followed with N758.90bn.
The figures indicate that while the Federal Government significantly expanded domestic borrowing during the first half of 2026, investor demand remained robust despite the larger supply of securities.
The PUNCH earlier reported that foreign investors channelled $3.23bn into Nigerian bonds in the first quarter of 2026, highlighting a strong appetite for the country’s fixed-income securities amid elevated interest rates and improving confidence in the foreign exchange market.
Data from the capital importation report released by the National Bureau of Statistics showed that bond investments accounted for 32.71 per cent of the $9.86bn portfolio investments recorded during the quarter and 31.10 per cent of the total $10.37bn capital imported into the country.
The bond inflow represented a 267.67 per cent increase from the $877.41m recorded in the corresponding period of 2025 and a 63.76 per cent rise from the $1.97bn attracted in the preceding quarter.
The sharp increase reflects the attractiveness of Nigerian sovereign debt instruments, which have offered among the highest yields in emerging and frontier markets following the Central Bank of Nigeria’s aggressive monetary-tightening cycle over the past two years.
Since assuming office in September 2023, CBN Governor Olayemi Cardoso has led the Monetary Policy Committee through one of the most aggressive tightening cycles in Nigeria’s history, raising the Monetary Policy Rate from 18.75 per cent to a peak of 27.50 per cent through a series of hikes in 2024 aimed at curbing inflation, stabilising the naira and restoring investor confidence.
After holding the benchmark rate at 27.50 per cent throughout most of 2025, the MPC began a cautious easing cycle in September 2025, cutting the MPR by 50 basis points to 27.00 per cent as inflation moderated for several consecutive months, before lowering it further to 26.50 per cent in early 2026.
At its most recent 305th meeting in May 2026, the MPC opted to retain the MPR at 26.50 per cent and leave all other key policy parameters unchanged, citing renewed inflationary pressures linked to global energy market disruptions while seeking to preserve the macroeconomic gains achieved through earlier tightening measures.
A renowned economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, recently warned that rising Federal Government borrowing from the domestic financial system is increasingly crowding out the private sector, as banks favour low-risk, high-yield government securities over lending to businesses.
“The increase in credit to the government can be attributed to a number of factors. The government has been raising money to finance the deficit. So this financing of the deficit has led to the issuance of bonds, treasury bills, and so on, which banks also buy. The rate is also very attractive, and it’s more attractive to them than lending to the real sector,” Yusuf said. He further urged the government to moderate its borrowing.
In a separate conversation, he also noted that while high yields on government securities had helped draw portfolio investors, they were also increasing the burden of public debt.
Yusuf told The PUNCH that the interest rates offered on government bonds and treasury instruments were excessively high and required coordination between fiscal and monetary authorities to moderate.
“It’s helping us to attract portfolio investment, but it’s creating a huge burden of debt service. We have to balance those two objectives. We have to improve portfolio flows, but it’s costing us a lot in terms of our domestic borrowing and debt-servicing costs,” he said.
The economist argued that Nigeria should reduce its reliance on debt-funded public projects by expanding public-private partnerships. According to him, governments should identify commercially viable infrastructure projects and offer them to private investors rather than financing them through additional borrowing.
Market analysts predict that any significant reversal in Federal Government bond yields is highly unlikely to occur before the final quarter of 2026, which means Nigerian fixed-income investors should brace for a prolonged period of high interest rates.
According to the latest macroeconomic analysis from Coronation Asset Management, a combination of sticky inflation, aggressive monetary policy, and heightened fiscal pressures will keep yields firmly elevated throughout the upcoming quarter.
“We expect FGN bond yields to remain elevated through Q3 2026, with limited scope for a near-term reversal of the June repricing,” the firm stated in its June 2026 Economic Note.
Looking ahead to the upcoming July auction, experts believe market yields have established a new baseline that will be difficult to break without an explicit shift in economic data.
“Our base case is that marginal rates hold in a 17.5-19.0 per cent band on long-dated re-openings into the July auction, conditional on the MPC maintaining its hold at the 20-21 July meeting and inflation prints remaining sticky in the mid-teens,” Coronation Research noted.
The report further cautioned that risks remain heavily tilted toward even higher yields if macroeconomic pressures intensify over the next few weeks. “Upside risk would come from a fourth straight inflation uptick, a weaker naira, or another large NTB auction ahead of the next bond sale,” the report added.
Conversely, the window for rates to cool down remains tightly restricted by the Central Bank of Nigeria’s policy timeline. “Downside risk would require a clear, sustained lower inflation print or an MPC easing signal, neither of which we see as most likely before Q4 2026,” the analysts explained.
In light of this persistent high-interest-rate environment, asset managers are advising a defensive investment approach, urging capital preservation via short-term instruments rather than locking funds into long-dated bonds prematurely.
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