Nigeria’s domestic debt market witnessed an extraordinary surge in investor demand in September 2025, as the Federal Government recorded a 530% oversubscription in its monthly bond auction. This came despite the Central Bank of Nigeria (CBN) lowering the Monetary Policy Rate (MPR) for the first time in five years.
The Debt Management Office (DMO) disclosed that total subscriptions hit N1.26 trillion, far exceeding the N200 billion initially offered. Allotments also soared to N576.62 billion, a sharp rise from N136.16 billion in August.
Investors Crowd into 7-Year Bonds
The DMO reopened two instruments in September the 17.945% FGN AUG 2030 (5-year) and the 17.95% FGN JUN 2032 (7-year) with N100 billion offered on each.
Demand was extraordinary. The 5-year bond attracted N231.79 billion in bids, compared with N102.36 billion in August. Interest in the 7-year paper was even stronger, with N1.03 trillion in bids against just N165.81 billion a month earlier.
Overall, subscriptions jumped more than fourfold, pushing the bid-to-offer ratio to 6.3 times and reflecting the scale of excess liquidity in the system, as well as a scarcity of alternative high-yield investment options.
Allotments Quadruple to N576.62 Billion
Responding to the overwhelming demand, the DMO allotted N576.62 billion in September, quadrupling the August figure. Most of this went into the 7-year tenor, which received N488.83 billion, up from N90.16 billion in August. The 5-year paper saw allotments rise to N87.80 billion from N46.01 billion.
The decision highlights the government’s strategy to lean on longer-dated bonds to secure financing while balancing investor appetite with yield management.
Despite the flood of bids, yields moderated. The 5-year bond cleared at 16.00%, down from 17.945% in August. The 7-year bond settled at 16.20%, compared with 18.00% previously.
The bid ranges also narrowed:
- 5-year bids fell within 15.00%–17.95% (down from 12.50%–21.50% in August).
- 7-year bids compressed to 14.95%–19.20% (from 15.00%–22.00%).
This reflects growing clarity in investor expectations, with many aligning with the CBN’s recent monetary stance and Nigeria’s improving inflation outlook.
What to Know About CBN’s Policy Shift
The auction occurred just days after the CBN cut the benchmark MPR to 27% from 27.5%—its first rate cut since 2020. This came on the back of sustained disinflation, with headline inflation falling for five straight months, from 22.64% in March to 20.12% in August.
To maintain liquidity control, the CBN paired the cut with tighter measures, including:
- A steeper 75% cash reserve requirement on non-TSA public deposits.
- A narrower interest rate corridor to reduce volatility.
These moves signal a cautious policy pivot, balancing the need to support growth while keeping inflation risks contained.
September’s bond auction shows investors are increasingly confident in Nigeria’s macroeconomic direction. With yields moderating, inflation easing, and liquidity conditions strong, appetite for government securities is likely to remain high in the coming months.
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