As the market prepares itself for the Federal Government of Nigeria (FGN) bond auction today, a subtle, but notable shift has occurred in the line-up. Rather than sticking with the new instruments announced, the FGN JAN 2030 and FGN JAN 2032, the Debt Management Office has opted to reopen and offer the 19.30% FGN APR 2029 and issue a brand new FGN JUNE 2032.
Elsewhere, the Central Bank of Nigeria seems to have clearly found new affection for short-term OMO instruments. Recent OMO auctions suggest a deliberate transition towards relatively brief tenors, with most offerings clustering between just over 100-day and shy of the 300-day mark. While this strategy may lack the allure of long-term commitment, it is reflective that the CBN is tactically agile and acutely aware of its immediate macroeconomic priorities.
In the same vein, the CBN has announced a regulatory forbearance policy, allowing certain banks to operate temporarily below the minimum capital ratios and restructure non‑performing loans. Affected institutions must now pause dividend pay-outs, executive bonuses, and offshore investments until their capital adequacy is independently verified.
Meanwhile, liquidity conditions improved markedly, and the Naira danced within a volatile band, reflecting both relief and caution in the financial system. The money market opened on Friday with a surplus of over ₦180 billion. Consequently, short-term borrowing rates showed significant changes: the Overnight (O/N) rate closed at 28.92% while the Open Repo Rate (OPR) settled at 28.17%, up from the 26% levels where they consistently featured in the previous weeks. Meanwhile, the Naira traded between a high of $/₦1,555.00 on Monday and a low of $/₦1,541.00 on Monday and Tuesday, finally closing at $/₦1,547.00 on Friday.
At the latest OMO auction, the CBN offered ₦300 billion across each tenor, yet investor appetites tilted aggressively toward the 204-day instrument. Bids for this tenor reached an eye-watering ₦1.1 trillion, leaving the shorter 155-day offering with a mere ₦48.10 billion in interest, which coincidentally became the exact allotment. It was a clear-cut case of market preference for slightly better risk-reward optics.
Interestingly, despite the ₦600 billion aggregate offer, total sales climbed to ₦1.068 trillion, a testament to both the hunger for yield in the market and the CBN’s deliberate overreach in liquidity sterilisation. The CBN, despite its restrained image, appears willing to soak up well beyond its initial target when the price is right.
Speaking of stop rates, the 155-day paper cleared at 24.20%, mirroring the rate at the last auction. The 204-day tenor, nudged slightly downward to clear at 24.59%, compared to its 24.64% previously reported. Both tenors closed near the upper bounds of their respective bid ranges, signalling investors interest in the yield.
TENOR | AUCTION DATE | OFFER (₦’ B) | BIDS (₦’ B) | RANGE OF BIDS (%) | STOP RATES (%) | PREVIOUS STOP RATES (%) | TOTAL SALE (₦’ B) |
155-DAY | 16-06-2025 | 300.00 | 48.10 | 24.1000-24.2000 | 24.2000 | 24.2000 | 48.10 |
204-DAY | 16-06-2025 | 300.00 | 1,103.08 | 24.3400-24.8900 | 24.5900 | 24.6400 | 1,020.08 |
In what looks like a surprising departure from its usual playbook, the DMO dialled down the volume on offer at the most recent Nigerian Treasury Bills (NTBs) auction. Instead of the traditional ₦450 billion to ₦650 billion spread across the three tenors, the total offer came in at a notably lean ₦162.02 billion.
Investors responded with unrelenting hunger. Subscriptions crossed the ₦1.2 trillion mark, a clear indication that liquidity remained abundant and that the chase for risk-free yields was still very much alive. Yet, despite the heavy demand, the authorities stuck to their guns. Allotments matched the offer precisely, with not a Naira more offered.
What followed was a strategic repricing of yields, largely at the directive of the CBN. The 364-day paper was the most affected. The 91-day yield fell by 18 basis points, while the 182-day tenor slipped by 15 basis points. The 364-day tenor took the steepest dive, shedding 51 basis points. Final stop rates settled at 17.8000%, 18.3500%, and 18.8400% respectively, all down from their previous levels.
But the real drama was buried in the bidding range. While the last auction saw absurdly low bids, with some players bidding as low as 9.4400% for the 364-day bill, the pendulum swung wildly in the other direction. Bids as high as 30.0000% were recorded for the same tenor. Some market participants speculate that the outcomes were reflective of the markets continuous test of the CBN’s resolve.
We are of the opinion that this auction was less about government borrowing and more about correcting market expectations. The DMO’s decision to go light on supply, combined with yield compression, is suggestive of a coordinated attempt to keep short-term rates from overheating while gently guiding the market towards a more stable curve.
AUCTION DATE | 18-06-2025 | 18-06-2025 | 18-06-2025 |
ALLOTMENT DATE | 19-06-2025 | 19-06-2025 | 19-06-2025 |
MATURITY DATE | 18-09-2025 | 18-12-2025 | 18-06-2026 |
TENOR | 91-DAY | 182-DAY | 364-DAY |
OFFER (₦) | 22,018,107,000 | 40,000,000,000 | 100,000,000,000 |
SUBSCRIPTION (₦) | 72,632,449,000 | 63,557,333,000 | 1,097,383,392,000 |
ALLOTMENT (₦) | 37,984,351,000 | 40,535,788,000 | 83,497,968,000 |
STOP RATES (%) | 17.8000 | 18.3500 | 18.8400 |
PREVIOUS STOP RATES (%) | 17.9800 | 18.5000 | 19.3500 |
At first glance, the shift in the bond auction appears to be a minor calendar adjustment, however, beneath the surface, it raises questions about the DMO’s strategy, particularly since the original circular for Q2 clearly indicated two new tenors, not a reissue. The April 2029 bond is, after all, a seasoned instrument. One cannot help but ask: what informed the change of course?
There are a few likely reasons; probably shifting to the APR 2029 may be a tactical choice to take advantage of existing benchmark familiarity. The bond has seen prior market action, which offers some pricing history and reduces uncertainty.
Another curious point is the revised offer size; while the initial quarterly calendar projected an issuance range of ₦150 billion to ₦200 billion for each tenor, the new circular pegs the auction at just ₦50 billion per tenor, a conservative ₦100 billion total. This could be an exercise in managing expectations, testing demand, or simply leaving room for discretionary allotment.
Still, if history is anything to go by, this modest headline figure should be taken with a grain of salt. The DMO has shown a consistent willingness to allot far beyond the advertised offer when the market produces compelling bids or based on discretion. With the current level of rates and investors bidding pattern, it would not be surprising if actual issuance overshoots the offer mark, perhaps significantly.
What we believe is that this auction may be less about the official numbers and more about reading the room. The DMO’s slight recalibration suggests a flexible strategy, one that balances fiscal funding needs, investor appetite, and yield curve management. For market participants, the signal is clear: a call to stay cautious, price competitively, and watch out for the real story.
For the second consecutive month, Nigeria’s inflation rate has taken another step down, from 23.71% in April to 22.97% in May 2025, a 74 basis points drop. At face value, this sounds progressive. A sub-23% print is certainly more palatable than what we witnessed earlier this year and many times last year. Peeling back the headline, one may wonder whether this is genuinely good news, or just statistical cosmetics.
From a financial market standpoint, however, the drop is worth watching. The bond market thrives on sentiment, and any data that suggests price stability tends to shape expectations around future yield direction. Already, there’s cautious optimism that we may have reached peak inflation, and that could justify the softer yield movement at the longer end of the curve.
For now, the Monetary Policy Rate (MPR) remains firmly in restrictive territory. With another inflation report due before the next MPC meeting, policymakers are likely to wait for more decisive evidence of a sustained reduced inflation trend. Unless that moderation becomes broader and more consistent, the CBN is expected to maintain its current stance. Rather than seeing recent data as a trigger to ease, the CBN will likely treat it as a justification to hold steady and stay the course.
Over the past week, the Nigerian financial system was awash with over ₦1 trillion in fresh inflows, a mix of NTBs and OMOs maturities that hit the market in quick succession. Although the CBN stepped in with an OMO auction, and sales exceeded ₦1 trillion, a move signalling the CBNs determination to neutralise excess liquidity and tame the effects of inflation. Even after the aggressive mop-up, surplus liquidity remained in the system. There were also reports that FAAC approved ₦1.659 trillion for May 2025, although it was not expressly stated if this has been posted.
The question now is not whether liquidity exists, but how well the monetary authorities can channel it without fuelling speculation or distorting market signals. The next few auctions will be telling. Where this volume of liquidity persists, we may see more unconventional sterilisation tools or a quiet reconfiguration of the auction.
The forbearance policy grants banks a temporary reprieve. They can delay full loss recognition and restructure troubled assets, essentially buying time to strengthen balance sheets without triggering abrupt, deep losses.
By suspending dividends, bonuses, and foreign investments, the CBN effectively forces institutions to retain earnings. This approach directs internal resources toward meeting capital shortfalls. Some analysts have identified Zenith, FirstBank, and Access as the most exposed, with forbearance loans comprising 23%, 14% and 4% of their loan books respectively.
In line with this, bank shares reportedly dipped following the announcement. Investors are recalibrating valuations in light of these hidden liabilities and deferring profit distributions. Paused dividends signal caution and delay immediate returns for shareholders.
However, regulatory forbearance is not unique to Nigeria. In South Korea, following the 1990s Asian Financial Crisis, capital thresholds were relaxed, even reaching 6% at one point, until banks could store up their fundamentals and dispose of non‑performing loans. The goal is clear: prevent systemic failure by stabilising fragile institutions.
This policy is a calculated move by the CBN: not a green light for recklessness, but a temporary waiver designed to stabilise and recapitalise the sector in a measured way. It preserves liquidity, avoids sudden disruption, and pressures banks to rebuild their financial resilience.
Last Monday, the Debt Management Office opened a ₦50 billion offer for its third Sovereign Green Bond, closing on Wednesday 18 June and settling today, ceteris paribus. This marks a strategic leap in Nigeria’s embrace of green finance under the 2025 Sustainable Bond Framework.
With a five‑year tenor and a coupon rate of 18.95% per annum, the bond attracted ₦91.42 billion in subscriptions, an oversubscription of about 183%. Allotments were capped at ₦47.355 billion, reflecting strong investor appetite but prudent issuance discipline.
Proceeds were earmarked for a range of projects aligned with Nigeria’s climate commitments under the Paris Agreement and its Net‑Zero 2060 target. These include:
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This is Nigeria’s first green issuance since 2019 and third overall. It deepens the green yield curve, improves secondary-market liquidity, and sets a clearer benchmark for future ESG-labelled securities.
Under the 2025 Sustainable Bond Framework, proceeds align with the government’s Nationally Determined Contributions, reinforcing regulatory standards and investor trust. Transparent tracking, impact reporting and external verification elevate the issuance beyond a box‑ticking exercise.
Whether this becomes routine or remains a symbolic uptick depends on the DMO’s follow‑through; consistent issuance, impact transparency and alignment with national sustainability targets.
Crude oil prices experienced a turbulent ride last week, largely driven by the intensifying geopolitical standoff between Iran and Israel. On Monday, both Brent and West Texas Intermediate (WTI) crude futures fell by over 2%, with Brent settling at $73.00 per barrel and WTI at $71.48. The decline was triggered by reports suggesting that Iran was actively seeking a ceasefire and had engaged regional intermediaries such as Qatar, Saudi Arabia, and Oman to pressure the United States into brokering a truce. Tehran reportedly offered to show flexibility in its nuclear programme as part of the deal. This softening stance momentarily calmed market fears, particularly as Iran’s critical oil export infrastructure remained untouched despite the ongoing exchange of missile fire with Israel.
However, that sense of calm proved short-lived. By Tuesday, oil prices had rebounded sharply. Brent closed at $76.92, up 5.37%, while WTI climbed 5.50% to end at $75.41. The reversal followed a fresh wave of Israeli airstrikes on Tehran, including an attack on the Shahran oil depot and another that sparked a fire at Iran’s South Pars gas field, a crucial shared asset with Qatar. US President Donald Trump escalated matters further by calling for the evacuation of Tehran, fuelling speculation that the United States could be drawn more directly into the conflict. Despite this, there remained no confirmed reports of disruptions to major oil flows or port operations, although the heightened risk premium was enough to reprice the market significantly higher.
Midweek trading saw prices hover near multi-month highs, with Brent stabilising around $76 per barrel and WTI near $75—their highest levels since February and January, respectively. Market sentiment remained tense as Israel’s military confirmed strikes near Tehran and reported incoming missiles from Iran. President Trump’s meetings with national security advisers added to speculation of a broader regional escalation. Still, crude export facilities in Iran and shipping through the Strait of Hormuz continued relatively unaffected. Ample global supply helped steady prices, with record-high US output and rising OPEC+ production acting as buffers.
On the macro front, the International Energy Agency (IEA) published its latest forecasts, painting a picture of a market that remains fundamentally well supplied despite geopolitical risks. The IEA now expects global oil demand to rise by 720,000 barrels per day in 2025, a slight downward revision from its earlier estimate. Global supply, on the other hand, is projected to increase by 1.8 million barrels per day this year, an upward revision of 200,000. Barring a major disruption, the IEA believes that the oil market will remain balanced over the medium term. It also forecasts that global oil demand will peak by 2029 at around 105.6 million barrels per day, before beginning a gradual decline. By 2030, global production capacity is expected to rise to 114.7 million barrels per day.
The demand narrative is increasingly regional. In China, which has long been the engine of global oil consumption growth, demand is expected to peak as early as 2027. The shift is largely due to accelerated electric vehicle adoption, high-speed rail expansion, and economic headwinds. The IEA now projects that China’s oil consumption in 2030 will only marginally exceed 2024 levels, a sharp revision from previous expectations of sustained growth.
This week, an estimated ₦500 billion is expected to flow into the Nigerian financial system through bond coupon payments (notably the FGN June 2033, June 2038, and June 2053 issuances) and NTB maturities. While this level of inflow is not unprecedented, it comes at a time when the Central Bank is already walking a tightrope between liquidity sterilisation and market stability. With system liquidity already elevated despite over ₦1 trillion in recent OMO sales, the question is no longer if the CBN will intervene, but how aggressively.
Some analysts believe the Central Bank will need to ramp up its OMO issuances in the days ahead, possibly at higher stop rates or across longer tenors, to anchor inflation expectations and prevent excessive Naira liquidity from spilling into speculative demand. But that posture isn’t without risks. Crowding out private credit, further tightening real yields, or overreaching with monetary tools could weigh on market sentiment, especially in an environment already sensitive to fiscal consolidation pressures and regulatory uncertainty.
Looking ahead, the key variables to watch will be the CBN’s next round of OMO auctions, investor appetite at the June bond auction, and any signal from the Monetary Policy Committee on the direction of the MPR. The fixed income market is bracing up for another round of delicate manoeuvring. Yields may remain elevated at the short end, where the CBN doubles down on liquidity mop-ups, but at the long end, pricing may drift sideways as participants weigh fiscal pressures against real yield attractiveness.
America’s surprise direct strike on Iran over the weekend may introduce a new layer of escalations that will inevitably affect commodity markets and interest rates globally. We must all watch closely to gauge the response form Iran, if at all any.
