Paragraph 1: Overview of Q1 2025 FGN Bond Issuance
The Nigerian Federal Government successfully raised N1.94 trillion from bond investors during the first quarter of 2025, exclusively through Federal Government of Nigeria (FGN) bonds. This figure excludes borrowings from the FGN savings bond program, which targets retail investors. The government initially offered N1.10 trillion in bonds but ultimately allocated N1.94 trillion due to robust investor demand, which reached N2.83 trillion in total subscriptions. This strong interest underscores investor confidence in FGN bonds despite the prevailing high-interest-rate environment.
Paragraph 2: Monthly Breakdown of Bond Auctions
The bond issuance was conducted through monthly auctions in January, February, and March 2025. In January, the government offered N450 billion across three instruments: a 5-year bond, a 7-year bond, and a newly introduced 10-year bond. Investor subscriptions totaled N669.94 billion, and the government allotted N601.04 billion, entirely through competitive bidding. February saw the government offer N350 billion across the 5-year and 7-year bonds, with demand surging to N1.63 trillion. Despite this high demand, the Debt Management Office (DMO) cautiously allotted N910.39 billion. Finally, in March, the government offered N300 billion for two bonds, a re-opening of the 5-year bond and a 9-year bond. Subscriptions reached N530.31 billion, with N423.68 billion allotted, including a significant portion (N152.45 billion) through non-competitive allotments, indicating strong institutional investor interest.
Paragraph 3: Comparison with Q1 2024 and Shift in Borrowing Strategy
Comparing Q1 2025 with the same period in 2024 reveals a shift in the government’s borrowing strategy. While the N1.94 trillion raised in Q1 2025 is lower than the N2.52 trillion raised in Q1 2024, this reflects a more restrained approach to borrowing in 2025. The total offer in Q1 2024 was significantly higher at N3.31 trillion, largely due to a substantial N2.5 trillion offer in February 2024 alone. The lower offer of N1.10 trillion in Q1 2025 indicates a deliberate moderation in borrowing, likely in response to the high-interest-rate environment. This more conservative approach extended to allotments as well, despite consistently high subscription levels.
Paragraph 4: Interest Rate Dynamics and Investor Preferences
The marginal rates on bonds in Q1 2025 provide insights into market dynamics. In January 2025, marginal rates ranged from 21.79% to 22.60%, significantly higher than the 15.00% to 16.50% range in January 2024. However, by March 2025, rates had eased slightly to between 19.00% and 19.99%, suggesting a potential stabilization of interest rate expectations or a return of investor confidence. Throughout both years, the 7-year and 10-year bonds consistently attracted the strongest demand, reflecting a preference among institutional investors, particularly pension funds and insurance companies, for medium- to long-term risk-free assets that align with their long-term liabilities.
Paragraph 5: DMO’s Strategic Approach to Bond Issuance
The DMO adopted a strategic approach to bond issuance in 2025, focusing on fewer instruments per auction while maximizing the amount raised from each bond. This strategy involved deepening liquidity in existing instruments through re-openings and maintaining benchmark bonds across key tenors. This approach not only simplifies debt management but also fosters price discovery in the secondary market by concentrating liquidity in fewer bonds. Furthermore, listing additional units of existing bonds on the Nigerian Exchange Limited (NGX), as seen with the February 2025 bonds, enhances market depth and trading activity.
Paragraph 6: Debt Sustainability and Expert Opinions
Nigeria’s debt profile has been subject to scrutiny and expert analysis. While some analysts express concerns about the need for immediate action to prevent further deterioration, the International Monetary Fund (IMF) offered a more optimistic assessment during a recent country visit, classifying Nigeria’s debt level as moderate rather than high-risk. However, the IMF cautioned against complacency and emphasized the need for a long-term strategy to reduce reliance on debt. Experts concur with this view, advocating for prudent fiscal management, improved tax collection, efficient budget allocation, and sustained real economic growth to strengthen Nigeria’s fiscal position and ensure long-term debt sustainability.
