FGN Bond Auction Attracts N1.73tn in Investor Bids

Investors showed strong appetite for FGN bonds at the Federal Government’s 17 August 2026 debt auction, submitting bids worth N1.73tn.

The Debt Management Office (DMO) eventually allotted N1.56tn across three reopened securities, significantly above the N1.10tn initially put up for sale. Strong demand from non-competitive investors helped drive the higher allocation.

The auction featured FGN bonds maturing in 2035, 2037 and 2038, with settlement scheduled for 19 August. The DMO received 595 bids, of which 226 were successful.

The 15.45 per cent FGN June 2038 bond attracted the strongest interest, receiving 225 bids worth N821.32bn. The DMO accepted 161 competitive bids and allotted N631.02bn through that channel.

A further N742.29bn went to non-competitive investors in the 2038 bond, pushing its total allocation above N1.37tn. Its marginal rate was 17.79 per cent.

The 22.60 per cent FGN January 2035 bond received 199 bids valued at N513.61bn. The DMO accepted 31 bids, allocating N64.13bn competitively and another N10bn to non-competitive bidders. The instrument cleared at a marginal rate of 17.15 per cent.

Meanwhile, the 16.2499 per cent FGN April 2037 bond attracted 171 bids worth N392.48bn. Thirty-four bids were accepted, resulting in an allocation of N110.01bn at a marginal rate of 17.19 per cent. There was no non-competitive allocation for the bond.

The results point to continued demand for longer-dated government securities, particularly the 2038 instrument, which alone accounted for almost half of the total bids submitted.

At the same time, investors accepted significantly lower yields than they did at the previous auction in July. The 2035, 2037 and 2038 bonds recorded marginal rates of 18.34 per cent, 18.35 per cent and 18.40 per cent respectively in July.

That means the August auction recorded yield reductions of more than 100 basis points across all three securities. The development suggests investors remained willing to lend to the Federal Government at lower returns despite maintaining strong demand.

The DMO retained the original coupon rates of 22.60 per cent for the 2035 bond, 16.2499 per cent for the 2037 bond and 15.45 per cent for the 2038 bond. Coupon rates determine the periodic interest payments, while marginal rates represent the yields at which successful bids were cleared.

The FGN bonds are issued by the DMO on behalf of the Federal Government to support budget financing and other public spending. Investors receive regular coupon payments, with the principal repaid when each bond reaches maturity.

The securities are backed by the Federal Government and qualify as trustee investments under Nigerian law. They also receive tax-exempt treatment under relevant Companies Income Tax and Personal Income Tax provisions.

The August exercise forms part of the DMO’s third-quarter 2026 bond issuance programme, which provides for the three securities to be reopened in July, August and September.

The combination of strong subscriptions and falling clearing yields points to sustained investor confidence in sovereign debt, even as the Federal Government continues to rely on domestic borrowing to meet its fiscal obligations.

Would you consider FGN bonds attractive at the lower yields recorded in the latest auction?