The Federal Government is back at the domestic debt market this week, seeking to raise N1 trillion from investors through the Debt Management Office (DMO) in what has become a familiar monthly ritual of borrowing to plug the widening budget deficit.
In a circular released on Monday, the DMO announced the offer of two Federal Government of Nigeria (FGN) bonds, a brand-new 10-year instrument, and a reopening of an existing long-dated security as it continues to lean on medium- and long-term debt to fund government spending.
The offer is split unevenly between the two papers. The larger portion, N600 billion, will come from the reopening of the 15.45 percent FGN June 2038 bond, a 15-year instrument whose coupon rate is already fixed from its original issuance.
The smaller tranche, N400 billion, introduces a new 10-year bond maturing in September 2036, giving the market a fresh benchmark at the shorter end of the DMO’s long-tenor offerings.
Both bonds go for N1,000 per unit, with the DMO setting a minimum subscription threshold designed to keep the auction the preserve of institutional players’ pension funds, banks, insurance companies and other deep-pocketed investors rather than retail savers, who are instead funnelled toward the DMO’s separate Savings Bond programme.
Subscription opened on Monday, September 14, with settlement due two days later on September 16.
For the new 10-year bond, price discovery will happen the conventional way, through competitive bidding at auction. But because the 2038 paper is a reopening, its coupon is already locked at 15.45 percent from when it first came to market.
Investors bidding for that instrument will instead compete on yield: the DMO will accept bids up to whatever yield-to-maturity clears the N600 billion on offer, with successful bidders paying a price that reflects that yield plus any interest that has accrued since the bond’s last coupon date, a standard mechanism that keeps reopened bonds aligned with prevailing market rates.
Both instruments carry the conventional FGN bond structure: interest paid semi-annually to holders, with the full principal repaid in a single bullet payment when the bond matures.
As with all FGN bonds, the securities are backed by the full faith and credit of the Federal Government and charged upon the country’s general assets the sovereign guarantee that has made them a benchmark, low-risk anchor for Nigeria’s fixed-income market.
The bonds also come with regulatory and tax advantages that have long made them attractive to institutional balance sheets. They qualify as approved investments for trustees under the Trustee Investment Act and are treated as government securities under both the Company Income Tax Act and the Personal Income Tax Act, entitling holders to relevant tax exemptions.
Once issued, the bonds will be listed on both the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange and count as liquid assets for banks calculating their liquidity ratios a feature that keeps demand from the banking sector consistently strong.
Monday’s auction is the third and final leg of the DMO’s third-quarter issuance calendar, which set out to raise roughly N4 trillion across auctions in July, August, and September all through reopenings of existing bonds rather than fresh issuances, aside from this month’s new 10-year paper.
The pattern reflects the government’s continued reliance on the domestic bond market to finance a 2026 budget deficit that has widened alongside an expanded spending plan; the Federal Government’s total planned borrowing for the year was revised upward to N29.2 trillion.
Demand at recent auctions suggests the market has ample appetite to absorb the offer. At August’s auction, the DMO received bids worth N1.73 trillion against an initial offer of N1.1 trillion and ultimately allotted N1.56 trillion comfortably above what it had set out to raise.
Clearing rates, meanwhile, have been trending down: the 15-year bond that sold at 18.04 percent in July cleared at 17.79 percent by August, a sign that borrowing costs on the longer end of the curve may be easing slightly even as the government keeps tapping the market for large sums.
Analysts will be watching Monday’s results closely, both for the yield at which the new 10-year bond clears and for whether September’s demand matches the oversubscription seen in prior months a test of how much appetite institutional investors still have for long-dated government paper amid shifting liquidity conditions and monetary policy signals from the Central Bank of Nigeria.
WHAT YOU SHOULD KNOW
The Federal Government is asking investors for N1 trillion this week through two bonds:: a new 10-year note and a reopened 15-year paper at 15.45% with subscription open now and settlement due September 16.
The key thing to watch: based on recent auctions, demand has consistently outstripped supply (August alone drew N1.73tn in bids against a N1.1tn offer), so this is less a question of whether the government will raise the money and more a question of at what yield a number that will signal where Nigeria’s borrowing costs are headed next.
