FG Bond Auction Draws N1.74tn as Investors Chase High Yields

Investors submitted bids worth ₦1.74tn at the Federal Government’s July 2026 bond auction, showing strong demand for long-term naira investments.

The Debt Management Office offered ₦1.2tn across three reopened bonds but received subscriptions totalling ₦1.738tn. This means demand exceeded the amount offered by about ₦538.66bn.

Despite the high subscriptions, the DMO allotted ₦929.32bn, suggesting that many bids came at interest rates the government was unwilling to accept. The agency published the July auction result on July 20, 2026.

Three bonds offered to investors

The government offered ₦400bn under each of the following instruments:

The 22.60 per cent FGN January 2035 bond, the 16.2499 per cent FGN April 2037 bond and the 15.45 per cent FGN June 2038 bond.

All three were reopened bonds. This means they had been issued previously but were offered again to raise additional money.

The April 2037 bond attracted the highest demand. Investors submitted 211 bids worth ₦665.19bn. The DMO accepted 126 bids and allotted ₦381.46bn.

The January 2035 bond received 184 bids valued at ₦555.47bn. Ninety bids were successful, with ₦245.73bn allotted.

Investors also submitted 161 bids worth ₦518bn for the June 2038 bond. The DMO accepted 92 bids and allotted ₦302.13bn. The instrument also attracted a ₦50bn non-competitive bid.

Investors accept yields above 18 per cent

Successful bids for the three bonds were allotted at marginal rates ranging from 18.34 per cent to 18.40 per cent.

The January 2035 bond closed at 18.34 per cent, while the April 2037 bond cleared at 18.35 per cent. The June 2038 bond recorded the highest marginal rate at 18.40 per cent.

The original coupon rates of 22.60 per cent, 16.2499 per cent and 15.45 per cent will remain unchanged.

A bond’s coupon determines the interest payment investors receive. However, the price paid at auction affects the investor’s effective yield.

The strong demand shows that fixed-income securities remain attractive to pension funds, banks, asset managers and other investors seeking predictable returns.

It may also reflect the large amount of liquidity available in the financial system and limited low-risk investment options offering comparable yields.

Why the DMO allotted less than it offered

The government offered ₦1.2tn but accepted less than ₦1tn.

This difference matters because oversubscription does not mean the government must accept every bid.

Investors compete by stating the yields they are willing to accept. The DMO may reject bids carrying borrowing costs it considers too high.

By allotting ₦929.32bn, the government raised less than its target but avoided accepting some of the more expensive offers.

This approach can help control borrowing costs. However, yields above 18 per cent still show how expensive it has become for the Federal Government to borrow from the domestic market.

What the high demand means

The auction indicates that investors still have a strong appetite for Federal Government securities.

FGN bonds are generally considered among the lowest-risk naira investments because the Federal Government is responsible for repaying the principal and interest.

The bonds also provide regular interest income and can be traded in the secondary market before maturity.

However, strong demand should not automatically be interpreted as broad confidence in Nigeria’s economy.

High inflation, elevated interest rates and uncertainty in other asset classes can push investors towards government securities because they offer relatively stable returns.

The government’s high borrowing rates may also affect businesses. Banks and institutional investors can earn attractive returns from government debt without assuming the risks involved in lending to private companies.

This can reduce the amount of affordable credit available to businesses and households.

Bond settlement scheduled for July 22

Settlement for the successful bids is scheduled for July 22, 2026.

The January 2035 bond has about eight years and six months remaining before maturity.

The April 2037 instrument has approximately 10 years and nine months remaining, while the June 2038 bond has nearly 12 years left.

The Federal Government issues bonds through the DMO to finance budget deficits, refinance existing debt and support public expenditure.

Although July’s auction showed that the government can still attract substantial domestic funding, the interest rates underline the rising cost of financing Nigeria’s fiscal deficit.