The Federal Government has raised nearly N7.2 trillion through bond auctions in 2026, as it continues to rely heavily on domestic borrowing to finance its growing fiscal needs. Data obtained by Daily Sun showed that the funds were raised by the Debt Management Office (DMO), excluding proceeds from treasury bills, Sukuk and other government securities. The borrowing comes as the government works to finance a budget deficit estimated at N31.5 trillion.
Despite the sizeable amount already raised, the Federal Government still has significant ground to cover, with about N29 trillion earmarked for domestic borrowing in the budget. The N7.2 trillion raised through bonds represents less than one-quarter of that target, highlighting the scale of the funding challenge facing the government in the remaining months of the year. Analysts say the concern is not only about raising enough money but also about the impact of increased government borrowing on interest rates and access to credit for businesses and households.
At its latest bond auction, the DMO offered N1.1 trillion across three maturities but made competitive allotments of only N805.2 billion. Total sales, however, climbed to almost N1.6 trillion after N752.3 billion was allotted through non-competitive sales. Investors submitted bids worth N1.7 trillion, giving the auction a bid-to-cover ratio of 2.1 times, higher than the 1.9 times recorded at the previous auction. The strong demand suggests that investors remain interested in government securities, particularly as expectations grow that inflation and interest rates could gradually ease.
The June 2038 bond attracted the strongest interest, receiving N821.3 billion in bids against competitive sales of N631 billion. It cleared at a marginal yield of 17.79 per cent, even though some investors offered yields as high as 19 per cent. Similarly, the January 2035 bond attracted N513.6 billion in bids, but only N64.1 billion was allotted, with the marginal yield settling at 17.15 per cent. The limited allotments indicate that the DMO may be reluctant to accept borrowing costs it considers too high, a move that could help prevent expensive debt from putting further pressure on government finances.
However, increased sovereign borrowing could create fresh pressure on Nigeria’s private sector as banks, pension funds and asset managers continue to find government securities attractive because of their relatively low risk and competitive returns. Quest Merchant Bank said strong demand was being supported by expectations of further disinflation and a gradual decline in yields, encouraging investors to lock in current returns. While this could help the government meet its funding needs, experts warn that excessive borrowing could crowd out private-sector credit, making it harder and more expensive for businesses, particularly smaller firms, to access loans. The DMO therefore faces a delicate balancing act: financing the budget deficit while keeping borrowing costs under control and ensuring that Nigerian businesses are not starved of much-needed credit.
source: The sun
