DMO returns to popular 2038 bond with fresh N600 billion offer

The Federal Government is returning to one of its most frequently issued bonds as it looks to raise another N1 trillion from investors on Monday, September 14.

Of the N1 trillion being offered by the Debt Management Office (DMO), N600 billion will come from the reopening of the 15.45% FGN June 2038 bond, while another N400 billion will be raised through a new bond maturing in September 2036.

This means 60% of the money the government hopes to raise at Monday’s auction will come from a bond that has already been issued several times since it was introduced in June 2023.

The June 2038 bond has become an important source of borrowing for the Federal Government, particularly in 2026.

Nairametrics’ review of DMO auction data and Nigerian Exchange (NGX) filings shows that about N2.42 trillion worth of the bond is already outstanding.

If another N600 billion is allotted at Monday’s auction, the total value issued could rise above N3 trillion.

What the data is saying

The 15.45% FGN June 2038 bond was first issued in June 2023 as a 15-year Federal Government bond.

• At the time, the DMO offered just N90 billion to investors and eventually allotted N100.64 billion.
• Since then, the government has returned to the same bond several times rather than issuing an entirely new bond each time.
• It was reopened repeatedly between July 2023 and January 2024 before making a major comeback in the government’s borrowing programme in 2026.

The amounts involved have also become significantly larger.

• In July 2026, the DMO offered N400 billion of the bond and eventually allotted about N354.63 billion.
• A month later, the government increased the offer substantially to N750 billion.
• Demand was strong enough for the DMO to eventually allot about N1.37 trillion through competitive and non-competitive bids.
• NGX records following the August supplementary listing show that approximately N2.42 trillion worth of the June 2038 bond was outstanding.

Monday’s N600 billion offer therefore represents another major addition to the bond.

Why the government keeps returning to the bond

Reopening an existing bond allows the Federal Government to raise additional money using a security that investors are already familiar with.

Instead of creating a completely new bond every time it needs to borrow, the DMO can sell additional units of an existing bond.

• The June 2038 bond pays investors interest of 15.45% annually on its face value and will mature on June 21, 2038.
• However, investors buying the bond at an auction do not necessarily earn exactly 15.45%.
• The actual return depends on the price investors are willing to pay for the bond at the auction.
• This is why the yield at which the bond is sold has become an important indicator of the government’s borrowing cost.

For example, the July 2026 auction cleared at a yield of 18.40%, while the August auction cleared lower at 17.79%

• That decline suggested that the Federal Government was able to borrow at a slightly cheaper rate in August than it did a month earlier.
• Monday’s auction will therefore provide another indication of whether government borrowing costs are continuing to fall.

What you should know

The September bond auction comes as interest rates on government securities have started trending lower.

• At the Central Bank of Nigeria’s September 9 Treasury Bills auction, the yield on the one-year Treasury bill fell to 16.62%, marking its third consecutive decline.
• That makes Monday’s bond auction particularly important.
• Investors will be watching to see whether the June 2038 bond also records another decline from the 17.79% yield recorded in August.

A lower yield would mean the Federal Government is gradually borrowing at cheaper rates, while a higher yield would suggest investors are still demanding greater returns to lend money to the government for longer periods.

• The other N400 billion being offered on Monday will come from a newly created bond that matures in September 2036.
• Unlike the June 2038 bond, the new security does not yet have an established coupon rate, with its pricing expected to emerge from the auction.

The September auction forms part of the DMO’s revised borrowing programme for the third quarter of 2026, with the government increasingly relying on the domestic bond market to meet its financing needs.

What started as a relatively modest N90 billion offer in June 2023 has grown into a bond with about N2.42 trillion currently outstanding, and another successful N600 billion issuance could take its cumulative size beyond the N3 trillion mark.