DMO to Raise N800bn in Bond Auction Amid Softer Yields

Nigeria’s Debt Management Office (DMO) will auction 800 billion naira in reopened Federal Government bonds on Feb 23, testing investor appetite in a market where yields have retreated from last year’s peaks.
The offer, made on behalf of the Federal Government, comprises three existing instruments with coupon rates ranging from 17.95 percent to 19.89 percent. Settlement is scheduled for Feb 25, 2026.
The reopening structure allows the DMO to consolidate liquidity in outstanding benchmark issues rather than introduce new lines, a strategy aimed at deepening secondary market activity and enhancing price discovery.
The auction includes 400 billion naira of the 17.95 percent FGN bond due June 2032, 300 billion naira of the 19.89 percent FGN bond due May 2033 and 100 billion naira of the 19.00 percent FGN bond due February 2034. All instruments pay interest semi-annually and carry bullet repayment at maturity.
As reopened issues, the coupon rates are fixed. Successful bidders will pay a price that reflects the yield-to-maturity clearing at auction, plus accrued interest.
The offering comes amid signs of easing borrowing costs. Yields across Nigeria’s fixed-income market have compressed in recent weeks, driven by improved system liquidity and strong demand from domestic institutional investors, including pension funds.
Market data show average FGN bond yields slipping to around 16 percent in mid-February, down from elevated levels late last year. Treasury bills and central bank open market operation bills have recorded similar declines.
Compared with recent auctions, the reopened instruments point to softer funding conditions. In January, the DMO issued 300 billion naira of a February 2031 bond at 18.5 percent and 200 billion naira of a January 2035 bond at 22.60 percent. By contrast, the current reopening features coupon levels below 20 percent across all tenors.
Analysts say the shift reflects a combination of moderating inflationary pressures, improved liquidity expectations and positioning ahead of potential monetary policy adjustments. Strong participation from pension funds and other long-term asset managers has also supported demand, particularly for medium- to long-dated sovereign paper.
The bonds are backed by the full faith and credit of the Federal Government of Nigeria and qualify as liquid assets for banks’ liquidity ratio calculations. They are also eligible investments for pension funds and other tax-exempt institutional investors, broadening the buyer base.
All three instruments are listed on the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange, providing secondary market liquidity and transparency for investors seeking tradable sovereign assets.
The minimum subscription is set at 50.001 million naira, reinforcing the institutional nature of the offering.
For the government, the auction represents a key component of domestic debt financing for the 2026 fiscal cycle. By reopening established benchmarks, the DMO aims to manage refinancing risk, lengthen the maturity profile of public debt and reduce fragmentation across the yield curve.
Investors will watch closely for the stop rates at Monday’s auction as a gauge of confidence in the sovereign’s credit trajectory and expectations for interest rates. A strong bid-to-cover ratio and further compression in yields would signal sustained demand for naira-denominated assets despite global market volatility.
While coupon levels remain high in nominal terms, the downward trend in market yields suggests Nigeria may be entering a phase of gradually easing domestic financing costs. Monday’s sale will provide the clearest indication yet of how far that shift has progressed.