Investor Confidence and High Yields Drive N4.67 Trillion in FGN Bond Subscriptions in 2025
In the first seven months of 2025, the Federal Government of Nigeria (FGN) bonds drew an impressive N4.67 trillion in total subscriptions, signaling robust investor confidence driven by attractive yields and stable credit ratings. Although this marks a 9.9% decline from the N5.18 trillion recorded in the same period in 2024, the appetite for government debt remains strong. The Debt Management Office (DMO) allotted N4.09 trillion, slightly lower than the N4.35 trillion allotted during the same period last year, despite offering only N1.93 trillion initially.
The most recent bond auction held on July 28, 2025, saw the reopening of two instruments: a 5-Year FGN APR 2029 bond (19.30% coupon) and a 7-Year FGN JUN 2032 bond (17.95% coupon). These offerings attracted subscriptions of N39.08 billion and N261.60 billion respectively. Ultimately, N13.43 billion was allotted for the 2029 bond and N172.50 billion for the 2032 bond, totaling N185.93 billion—well above the initial offer amount. Despite strong demand, the bonds were allotted at marginally lower rates (15.69% and 15.90%), indicating a drop in yield expectations.
The drop in marginal rates suggests investors expect declining inflation and potentially lower interest rates, with the DMO highlighting steady investor appetite. The auction attracted 149 bids, out of which 74 were successful. Bonds were priced at N1,000 per unit with a minimum subscription of N50.001 million. While coupon rates remain fixed, final payments depended on yield-to-maturity and accrued interest. Interest payments are structured semi-annually, offering regular income to bondholders.
The FGN bonds are a key part of the government’s strategy to finance the 2025 national budget, with a borrowing target of N13 trillion. January’s bond auction alone raised N669.94 billion, exceeding the N450 billion target, showing the government’s growing reliance on domestic borrowing to meet infrastructure and budgetary obligations. The continued strong subscription levels underscore the trust investors place in the government’s ability to meet its debt obligations.
Analysts from Coronation and other financial institutions believe 2025 may mark a turning point for the bond market, following a period of poor returns. If inflation is brought under control and the Central Bank of Nigeria (CBN) lowers interest rates, a bond market rally could ensue, possibly supported by Naira appreciation. Even without currency gains, falling rates and inflation could attract more long-term investors. Experts note that the demand for bonds reflects both surplus institutional liquidity and a shift toward safer, predictable returns in uncertain economic times.
Source: This day