The Federal Government raised N5.08 trillion from the domestic bond market in the first half of 2026, nearly doubling the amount borrowed during the same period last year.
Data from the Debt Management Office showed that bond allotments rose by 77.8 percent from N2.86 trillion in the first six months of 2025. The increase came as the government expanded its borrowing programme to fund the budget deficit and other obligations.
Investor demand remained strong. Total subscriptions climbed to N9.04 trillion from N4.37 trillion a year earlier, representing an increase of about 107 percent.
However, demand did not grow as quickly as the government’s funding needs. Subscriptions were equal to 182.6 percent of the amount offered in the first half of 2026, down from 236.1 percent in the corresponding period of 2025.
Government expands borrowing programme
The DMO offered N4.95 trillion worth of bonds between January and June, compared with N1.85 trillion during the same period last year.
This represents an increase of N3.10 trillion, or 167.6 percent, and highlights the government’s growing dependence on the domestic debt market.
January recorded the highest allotment during the period. The government raised about N1.68 trillion, including competitive and non-competitive allocations, compared with N601.04 billion in January 2025.
June followed with N1.22 trillion in total allotments, up sharply from N100 billion in the same month last year. May also recorded a major increase, with total allotments rising to N894.51 billion from N300.69 billion.
Borrowing declined in February and April, while March recorded a moderate increase.
Borrowing costs decline
The government raised more money despite a reduction in bond rates.
Marginal rates ranged from 15.50 percent to 18.35 percent in the first half of 2026, compared with a range of 17.75 percent to 22.60 percent during the same period last year.
The average marginal rate declined to about 16.78 percent from 19.84 percent. The allotment-weighted average rate also fell to 17.29 percent from 20.14 percent.
The decline suggests that the government obtained funding at lower rates than it did last year, although debt-servicing costs remain high because of the scale of borrowing.
The 22.60 percent FGN January 2035 bond remained the government’s largest funding instrument, attracting about N2.30 trillion in subscriptions and N1.52 trillion in allotments across four auctions.
The 16.2499 percent FGN April 2037 bond also attracted strong interest, recording more than N1.24 trillion in subscriptions and about N1.38 trillion in allotments.
Investors retain appetite for government debt
The increase in subscriptions shows that banks, pension funds, asset managers, and other investors continue to favor government securities.
Sovereign bonds offer relatively high returns and carry lower default risks than loans to private companies.
Foreign investors have also increased their exposure to Nigeria’s bond market. Bond investments reached $3.23 billion in the first quarter of 2026, up 267.7 percent from $877.41 million in the corresponding period of 2025.
The inflows reflect the attraction of Nigeria’s high-yield fixed-income market and improving confidence in the foreign exchange market.
Private-sector borrowing faces pressure
The government’s growing presence in the domestic debt market could make it harder and more expensive for businesses to obtain loans.
Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise, said banks often prefer government securities because they provide attractive returns with lower risks than lending to businesses.
This creates a crowding-out effect, where government borrowing competes with companies for available capital.
Small and medium-sized businesses may feel the greatest impact because many already struggle with high lending rates, weak consumer demand, and rising operating costs.
Yusuf also warned that high bond yields, while useful for attracting portfolio investors, increase the government’s debt-servicing burden.
He urged the government to reduce its reliance on borrowing by using public-private partnerships to finance commercially viable infrastructure projects.
What this means
The N5.08 trillion raised in six months gives the government access to funds for its spending commitments, but it also increases Nigeria’s domestic debt stock and future interest obligations.
Lower marginal rates provide some relief, but the rapid growth in borrowing means total debt-service costs could remain significant.
For investors, government bonds will continue to offer attractive returns, especially while inflation and interest rates remain elevated.
For businesses, however, the trend could limit access to affordable credit as banks allocate more funds to low-risk government securities.
Analysts expect bond yields to remain high through the third quarter of 2026, with a meaningful decline unlikely before the final quarter unless inflation falls steadily or the Central Bank signals further monetary easing.
