Subscription to FG Bond Crosses N13tn as Rate on 10-Year Hits 16.79%

Between January and September 2026, total subscription to FGN Bonds reached a historic high of N13.72 trillion, as investors continued to show strong demand for the securities despite modest yields. The high interest from institutional investors, including pension funds, banks, and insurance companies, was driven by relatively attractive rates, which encouraged them to lock in returns.

The government's reliance on the domestic debt market to finance its fiscal obligations persisted, even as external financing options became more constrained.

In the nine months of 2026, the Debt Management Office (DMO) aimed to raise N8.35 trillion to cover the budget deficit, but managed to raise an estimated N7.14 trillion instead. The auction results showed broad-based investor participation, but demand was heavily skewed toward the long end of the curve, as the market continued to prefer higher yields in a tight monetary environment.

The latest FGN bond auction in September 2026 offered a 16.79% rate on the 12-year FGN SEP 2036 (New Issue) and a 15.45% rate on the 15.45% FGN JUN 2038 bond, which was being reopened. The DMO allocated N748.64 billion to these bonds, with total demand settling at N1.49 trillion. The auction's stop rate expanded to 16.7900% for the SEP 2036 bond and 16.8500% for the JUN 2038 bond.

While shorter tenors saw relatively softer participation, the demand was strongest at the long end of the curve. The amount offered by the DMO fell from N1.10 trillion in August to N1 trillion in September 2026, a reduction of N100 billion or 9.1 percent. Subscriptions also declined from N1.727 trillion in August to N1.495 trillion in September 2026, representing a 13.5 percent decline. Nevertheless, investors still subscribed to about 1.49 times the amount offered in September 2026, indicating strong demand.

The proportion of the offered amount that was allotted increased from 73.2 percent in August to 74.9 percent in September, showing that the auction remained oversubscribed despite the decline in demand. Analysts cited modest yields as the primary reason for the strong demand for FGN bonds, highlighting investors' confidence in the federal government's ability to meet its debt obligations.