Nigeria’s Debt Management Office Plans Major Bond Reopening Auction
The Debt Management Office (DMO) is poised to reopen two Federal Government of Nigeria (FGN) bonds, aiming to raise a total of N1.2 trillion during an auction scheduled for Sunday, June 22, 2026.
Details of the Auction
In a notice issued on Monday, June 15, the DMO outlined its plans to offer N600 billion for the reopening of each of the 10-year and 20-year bonds, with the settlement date set for June 24, 2026. This issuance is a strategic component of the federal government’s domestic borrowing initiative, aimed at financing budgetary commitments and effectively managing public debt levels.
Loan and Yield Structure
The offering circular reveals that N1.2 trillion will be raised through these two bond reopenings, which span medium and long-term maturities. Investors will have the opportunity to secure N600 billion through the 10-year bond maturing in January 2035 at a yield of 22.60%, and another N600 billion from the 20-year bond maturing in April 2037 with a yield of 16.2499%. Successful bidders will pay a price that reflects the yield to maturity of the cleared bid along with any unpaid interest.
Investment Parameters
The subscription price for these bonds is set at N1,000 per unit, with a minimum investment requirement of N50,001,000, and further multiples of N1,000 thereafter. Interest payments for these bonds occur biannually, with the principal amount repaid in a lump sum upon maturity.
Market Conditions Influencing the Auction
This auction comes at a critical juncture as the Central Bank of Nigeria (CBN) continues to tighten liquidity through open market operations, resulting in significant increases in bond market yields. The N1.2 trillion offering is one of the largest FGN bond auctions in recent months, indicating a trend toward further liquidity constraints. Notably, the higher coupon rate of the January 2035 bond suggests potential investor strategies may differ from those for the April 2037 bond, which has a lower coupon rate, likely leading to pricing adjustments for the latter due to market conditions.
Investor Landscape for FGN Bonds
Investor interest in long-term FGN instruments remains robust, particularly among pension funds and insurance companies in search of tax-exempt products with durations that align well with their liabilities. FGN bonds are reputed for their stability, being backed by the full faith and credit of the Federal Government, making them a preferred choice for domestic investors.
Understanding the Benefits of FGN Bonds
FGN bonds are listed on both the Nigeria Exchange Limited (NGX) and the FMDQ OTC stock exchanges, facilitating secondary market liquidity for investors. These bonds qualify as liquid assets for banks’ liquidity ratio assessments and offer tax exemptions for qualified investors under the provisions of the Corporate Income Tax Act (CITA) and the Personal Income Tax Act (PITA). Additionally, they meet the criteria for securities eligible for investment under the Trustee Investment Act. Given this auction format, pricing will largely depend on investor demand rather than fixed interest rates, and allocations will be made at yields that clear the offering volume. Market participants are expected to closely monitor the auction on June 22 to gauge yield trends, particularly for longer maturities in Nigeria’s sovereign yield curve.
Yields have shown an upward trajectory in recent trading sessions within both the primary and secondary markets, underscoring the impact of coupon rates and market prices on the federal government’s borrowing costs.
