FGN Bond Auction Sees Record N1.54trn Subscription
Investors are rushing to lock in high returns before interest rates eventually fall, driving the Federal Government to raise a historic N1.54 trillion in its January 2026 bond auction.
This record-breaking allotment, the highest in the Debt Management Office’s (DMO) history signals a strategic scramble by investors to secure high yields amid a massive N23.85 trillion fiscal deficit.
“On the government side, January has seen a high level of liquidity, and this auction sought to mop up excess flows. The deficit for the 2026 budget is over N25 trillion, meaning they have to raise more money to plug the shortfall. Also, revenue projection is lower compared to last year,” Nabila Mohhammed, investment analyst at ChapelHill Denham, said.
“Last week, yields in the secondary market increased when the schedule of the bond auction was released for the reopening of a 10-year bond with a coupon of over 20 percent, which made a lot of investors keep funds in anticipation of the primary auction,” Muhammed said.
The auction featured three re-opening instruments: the FGN FEB 2031 (a 7-Year bond), the FGN FEB 2034 (10-Year bond), and the FGN JAN 2035 (10-Year bond).
Historical trend of DMO’s allotment
Based on the official records from the Debt Management Office (DMO), here is the historical context for the last 10 years: January 2026 set the record for the highest allotment in DMO history, reaching N1.54 trillion.
2016 – 2022 (The lower volume Years)
Between 2016 and 2022, the allotment figures were significantly lower than what we are seeing now. During this period average allotment was usually between N100 billion and N250 billion per month.
While from 2016–2019, the government rarely offered more than N150 billion in a single month, and between 2020–2022, Allotments started creeping up toward N300 billion – N400 billion as the budget deficit grew, but they never approached the trillion-naira mark.
From 2023 up until now, factors such as a larger budget deficit, high interest and inflationary rate environment, have caused larger issuances and allotment above N500 billion.
In a typical economy, investors demand a term premium, meaning higher interest for longer periods. However, this has not been the case for Nigeria’s debt market in recent years, where the shorter debt has offered higher interest than longer ones.
The 364-day Treasury Bill stop rate recently cleared as high as 18.47 percent, while the new 10-year FGN Bond (2035) cleared at a lower marginal rate of 17.52 percent.
The 95-basis-point difference between the one-year and ten-year instruments suggests that the market is actively betting on a significant monetary policy turn as the disinflation trend finally gains traction.
This 95-basis-point spread is wider than it was at the end of 2025. It suggests that while the Central Bank (CBN) is keeping its rates high, investors are so convinced of an eventual crash in rates that they are willing to accept lower returns today just to lock in for the next decade.
Analysts are now forecasting a 300 to 400 basis point (bps) cut in the benchmark interest rates for the latter part of 2026. This shift is supported by a persistent disinflation trend and currency stability.
The widening gap validates the recent outlook from CardinalStone Research, which dismissed the idea of a parallel shift (where all rates move down together).
Instead, CardinalStone points to a fragmented curve; they project a sharp 80bps rise in the 5–7 year bucket as the government manages maturity pressure, a 60bps rise at the 10-year bonds, and a modest 40bps increase at the short end ensures that the “cost of cash” remains high enough to deter FX speculation.
Emerging as the most preferred instrument is the FGN 2034 (10-year bond), which recorded subscriptions totaling N1.01 trillion against an offer of N400 billion.
This newly introduced JAN 2035 bond (10-year paper saw) had 335 total bids, the highest number of participants across the three offerings. A total of N570 billion worth of it was sold, more than double the N200 billion offered.
The 7-year bond attracted N514.45 billion in subscriptions.
In response to the strong demand, the DMO opted to allot N1.54 trillion, utilising the surplus liquidity to bolster the Federal Government’s funding requirements.
The credit squeeze for the real sector
While the DMO has started seeing oversubscription in its debt funding round to bridge the projected N23.85 trillion 2026 fiscal deficit, the crowding-out effect remains a looming shadow over the real economy as more companies run to raise equities over expensive debt.
Between T-Bills and Bonds, the government has already pulled over N3.8 trillion from the banking system in just three weeks.