Investors in Federal Government bonds subscribed to a total of N2.83 trillion in the first quarter of 2025, marking a decline from the N3.12 trillion recorded in the same period of 2024, according to data released by the Debt Management Office (DMO).
The lower subscription volume follows a reduction in the number of bond offers, as the government sought to moderate its borrowing amid high interest rates.
The Federal Government offered a total of N1.10 trillion in FGN bonds in Q1 2025, significantly lower than the N3.31 trillion offered in Q1 2024. This 66.8% decrease reflects a cautious approach, with the government opting to issue fewer instruments per auction while deepening liquidity in existing bonds.
Despite the reduced volume, the total amount allotted stood at N1.94 trillion, down 23% from N2.52 trillion in Q1 2024.
Market response to lower offers
- In January 2025, the government offered N450 billion across three instruments: the 5-year 19.30% FGN APR 2029, the 7-year 18.50% FGN FEB 2031, and the new 10-year 22.60% FGN JAN 2035 bond. Investors placed bids worth N669.94 billion, and the government allotted N601.04 billion. In contrast, January 2024 saw an offer of N360 billion, with subscriptions totalling N604.56 billion and allotments of N418.2 billion. Notably, there was no non-competitive allotment in January 2025, indicating that all funds were raised through competitive bidding.
- By February 2025, the government’s offer volume dropped to N350 billion, shared between the 5-year and 7-year bonds. Despite the reduced offer, demand surged to N1.63 trillion, far exceeding expectations. The DMO allotted N910.39 billion, maintaining a cautious stance compared to February 2024, when N2.5 trillion was offered, and N1.495 trillion was allotted. February 2024 witnessed the highest activity, driven by a single massive offer.
- In March 2025, the government offered N300 billion for two bonds — a re-opening of the 5-year 19.30% FGN APR 2029 and a 9-year 19.89% FGN MAY 2033. Subscriptions totalled N530.31 billion, with an allotment of N423.68 billion. The high level of non-competitive allotment in March, totalling N152.45 billion, indicates strong interest from institutional investors like pension funds. In comparison, March 2024 recorded an offer of N450 billion and subscriptions of N615.01 billion, with total allotments of N475.66 billion.
Adjusting to market dynamics
The decline in bond offers in 2025, compared to the previous year, signals a strategic shift by the Federal Government towards a more restrained borrowing pattern. This move aligns with the current high-interest rate environment, where managing debt sustainability has become crucial.
Marginal rates across bonds in Q1 2025 indicate a market adjustment, with January 2025 seeing rates ranging from 21.79% to 22.60%, significantly higher than January 2024’s range of 15.00% to 16.50%. By March 2025, marginal rates slightly eased to between 19.00% and 19.99%, suggesting a potential stabilisation of interest rate expectations.
Despite the conservative borrowing stance, investor appetite remained robust, particularly for medium- to long-term risk-free assets like the 7-year and 10-year bonds, which continue to attract institutional investors due to their alignment with long-term liabilities. The DMO’s strategy also supports price discovery in the secondary market while maintaining benchmark bonds across key tenors.
