FGN Bond Auction: DMO Sells N1.21 Trillion as Investors Pile Into the 2036 Paper at 17.29%

Nigeria's October FGN bond auction showed investors still want long-dated naira debt, but only at rates above 17%. The Debt Management Office (DMO) sold N1.21 trillion of bonds at the 19 October auction after receiving N1.75 trillion in subscriptions, according to auction results reported by Nairametrics analyst Olalekan Adigun. Demand was heavily concentrated in one bond: the September 2036 paper.

All three instruments on offer were reopenings of existing bonds, so the DMO was selling more of securities already in the market rather than launching new ones.

FGN bond auction results by maturity

The DMO offered N1.75 trillion across three maturities. Here is how each did:

• February 2034 (19.00% coupon): N500 billion offered, N304.08 billion in subscriptions, N78.36 billion allotted at a marginal rate of 16.99%.
• September 2036 (16.79% coupon): N800 billion offered, N925.35 billion in subscriptions, N781.31 billion allotted at 17.29%.
• June 2038 (15.45% coupon): N450 billion offered, N518.32 billion in subscriptions, N350.72 billion allotted at 17.19%.

The DMO received 420 bids in total, of which 267 were successful.

What the numbers say

Total subscriptions of N1.75 trillion matched the amount on offer almost exactly, so overall demand covered the auction about once. That headline hides a wide split. The 2036 bond was oversubscribed by about 16%, and the 2038 bond by about 15%. The 2034 bond drew only about 61% of its offer size, and the DMO sold less than a sixth of what it put up.

The DMO also chose not to sell everything investors bid for. It allotted about 69% of total subscriptions, which suggests it rejected bids it considered too expensive. That is a sign the debt office is trying to hold borrowing costs down rather than raise as much as possible.

Why the marginal rates matter

The marginal rate is the highest yield the DMO accepted. Comparing it with each bond's coupon shows the price buyers paid:

1. On the 2034 bond, the 16.99% marginal rate is below the 19.00% coupon, so buyers paid more than face value for its high interest payments.
2. On the 2036 bond, the 17.29% rate is above the 16.79% coupon, so it sold at a discount.
3. On the 2038 bond, the 17.19% rate is well above the 15.45% coupon, also a discount.

In plain terms, investors want roughly 17% to 17.3% to lend to the federal government for seven to twelve years. That is in line with the secondary market, where Nigeria's 10-year yield climbed to 17.05% earlier this week, as we reported in our look at Nigeria's 10-year bond yield.

How October compares with earlier auctions

According to Nairametrics:

• In August, the DMO allotted N1.56 trillion across three bonds on total demand of N1.73 trillion.
• In September, it offered N1 trillion through a new 10-year bond and a reopening of the June 2038 bond. Nairametrics did not give that auction's allotment or rates.

October's N1.21 trillion sale is smaller than August's, even though demand was similar, which fits the picture of a DMO that is more selective on price.

Nairametrics links the recent fall in rates to the Central Bank of Nigeria's decision on 22 September to cut its benchmark Monetary Policy Rate by 350 basis points to 23%. Yields above 17% on long bonds remain well below that policy rate, which tells you the market expects further easing over time.

What it means for investors

For pension funds, insurers and banks, a 17% to 17.3% yield on long-dated government paper is still a high real return if inflation keeps falling. Nigeria's headline inflation dropped to 14.63% in September, its lowest since 2025. Locking in today's rates looks attractive to buyers who expect both inflation and policy rates to keep coming down.

The weak demand for the 2034 bond is worth watching. It carries the highest coupon, so buyers must pay a premium, and some investors appear to prefer the longer bonds that can rise more in price if rates fall further.

For retail investors, these auctions are mostly reached through fund managers, banks or stockbrokers, since minimum subscriptions are large. Money market and bond funds that hold FGN paper pass these yields on, minus fees.

The next DMO auction and the CBN's next rate decision will show whether the 17% floor holds, or whether yields resume their slide.