The outcome of the June 2025 FGN Bond auction conducted by the Debt Management Office (DMO) sent a strong ripple across Nigeria’s fixed income market, revealing a bold shift in investor sentiment. Most striking was the dramatic yield compression on the 2029s, an eye-catching 123 basis points lower than the previous auction level, catching many market participants off guard and suggestive of a mixed institutional appetite, possible foreign portfolio inflows, and speculative plays.
In another development, the Federal Government of Nigeria reported revenue of ₦6.9 trillion in Q1 2025, a year-on-year increase of nearly 32% from the ₦5.2 trillion recorded in Q1 2024. Nigeria’s Minister of Finance, Mr Wale Edun, credited this improvement to sweeping reforms, including enhanced transparency, widespread digitisation of public finance systems, and stricter enforcement of remittance rules.
In the week under review, system liquidity was appreciable despite a recorded dual deficit, 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 ₦1.5 trillion.
Consequently, short-term borrowing rates showed significant changes with a record high of 32.00% in the week: the Overnight (O/N) rate closed at 27.00% while the Open Repo Rate (OPR) settled at 28.17%, up from the 28% levels they featured in the previous weeks. The Naira traded between a high of $/₦1,551.00 and a low of $/₦1,545.00 on Monday, reaching a high of $/₦1,553.00 on Wednesday, and closing at $/₦1,537.00 on Friday.
Looking at the performance from the last bond auction, the steepness of the yield drop felt engineered rather than organic. Several traders interpret the move as speculative and a short-term play rather than a reflection of macroeconomic fundamentals. Words like ‘forced’ and ‘unreal’ were used to describe the aggressive pricing. There is a rising consensus that this current yield level may be difficult to sustain.
Some participants now suspect that the Debt Management Office (DMO) is tactically guiding yields toward a psychological threshold of 16.00% across mid-to-long tenors. Achieving stable and attractive rates would likely serve a dual purpose of supporting domestic liquidity and signalling macroeconomic confidence to international markets.
The auction revealed stark contrasts in investor preference across tenors. The newly issued 7-year FGN JUN 2032 bond garnered bids of ₦561.17 billion (over 11x oversubscribed), while the reopening of the 5-year FGN APR 2029 drew ₦41.69 billion. Despite equal offer sizes of ₦50 billion, the DMO allotted just ₦1.05 billion for the 2029 bond, but a substantial ₦98.95 billion for the 2032 bond, almost 199% of the offered amount. Overall, the DMO allotted exactly ₦100 billion in total as initially offered.
Stop rates came in at 17.75% for the 2029 bond and 17.95% for the 2032, despite bid ranges extending as high as 20%, indicative of a deliberate yield compression, perhaps to support fiscal sustainability goals.
The 2029 bond, originally issued with a 19.30% coupon, closed at 17.75%, a 155-basis point yield reduction. Year-to-date, the stop rate on the 2029 bond fell by a substantial 404 basis points (from 21.79% in January 2025). The 2032 bond entered the market with a 17.95% coupon, significantly below the 19.849% on the 2033s (from the May 2025 auction) and above the coupon of similar maturities like the 12.50% on the April 2032 bond.
In the secondary market, investors with long positions from previous auctions realised profits compared to recent auction participants facing losses due to the market rates trading above the auction levels. Given the current landscape, investors should remain cautious, avoiding unsustainable rallies and position portfolios.
BONDS TENOR | APRIL 2029 | JUNE 2032 |
AUCTION DATE | 23-06-2025 | 23-06-2025 |
SETTLEMENT DATE | 25-06-2025 | 25-06-2025 |
MATURITY DATE | 17-04-2029 | 25-06-2032 |
TENORS | 5-YEAR | 7-YEAR |
AMOUNT OFFERED (₦) | 50 BILLION | 50 BILLION |
SUBSCRIPTION (₦) | 41.685 BILLION | 561.170 BILLION |
AMOUNT ALLOTTED (₦) | 1.1050 BILLION | 98.950 BILLION |
STOP RATES (%) | 17.7500 | 17.9500% |
PREVIOUS STOP RATES (%) | 18.9800 | NEW |
In a landmark step toward globalising access to Nigerian sovereign debt, BNY Mellon and Standard Bank have introduced Global Depository Notes (GDNs) backed by Naira-denominated bonds. The innovation aims to attract foreign investors by offering a Dollar-settled instrument that mirrors the yield and risk profile of Nigerian FGN bonds, without requiring direct exposure to local infrastructure.
These GDNs are eligible for settlement through Euroclear and Clearstream, two of the world’s largest international securities depositories, simplifying access for institutional players. The structure allows for seamless cross-border participation, unlocking a wider pool of capital for Nigeria’s domestic debt market.
According to BNY Mellon’s Global Head of Depositary Receipts, Chris Kearns, who described the GDN product as a ‘strategic bridge between global capital and African markets.’ The timing is apt as recent reforms, including foreign exchange liberalisation, tighter monetary policy, and renewed fiscal discipline, have helped restore confidence among global investors.
The launch signals a critical inflection point as Nigeria’s maturing debt market finds global traction; tools like GDNs could be pivotal in scaling up non-oil capital flows and reducing reliance on short-term speculative inflows.
System liquidity surged during the week on the back of significant inflows from both coupon payments and maturing instruments. On Monday, the DMO disbursed ₦216.16 billion in coupon payments across the June 2033, June 2038, and June 2053 bonds. By Thursday, an additional ₦283.78 billion from maturities entered the market, bringing the week’s total inflows to about ₦500 billion.
Despite the week’s liquidity inflow, the financial system briefly slipped into deficit following the completion and settlement of the June bond auction. On Tuesday, system liquidity had a shortfall of ₦29.32 billion. By Wednesday, the deficit deepened to over ₦137.65 billion as auction-related outflows drained market balances.
This temporary tightening, although expected was short-lived. By Thursday, system liquidity rebounded to a healthy surplus of ₦530.39 billion, largely due to the repayments recorded.
Beyond the headlines, the numbers recorded for the increase in revenue indicate a promising fiscal trajectory. Strengthening of the foreign exchange framework improved tax administration, and gains in non-oil revenues, such as VAT, customs duties, and company income tax, are helping to diversify income sources. Despite lingering challenges in oil production, the broader revenue base seems to be stable now. The performance strengthens Nigeria’s fiscal outlook. The improvement in the debt service-to-revenue ratio (now around 60%, compared to significantly higher levels in previous years) creates new fiscal space for capital spending, social programs, or more prudent debt refinancing.
The Nigerian All Share Index (ASI) sustained a bullish run for most days of the week, advancing from 118,579.65 points on Monday, 23rd June, to a peak of 121,257.69 points by Wednesday, 25th June, representing a 2.26% gain over a three-day period. This upward momentum reflected improved investor sentiment and increased positioning in fundamentally strong equities.
However, the market experienced a mild correction on Thursday and Friday, June 26th and 27th, as the ASI declined to 119,995.76 points, reflecting cumulative losses of 1,261.93 points over the two sessions. The downward trend is likely attributed to profit-taking activities following the midweek rally.
Despite the pullback, the ASI closed the review period with a net week-to-date gain of 1,416.11 points, underscoring resilience in the equities market. While short-term volatility may persist, overall sentiment remains broadly positive, supported by strong liquidity and macroeconomic expectations.
Oil markets are cooling. Brent crude has retreated from its recent $80 per barrel peak to trading closer to $67.80. U.S. WTI is hovering around $65.10 as of June 26, 2025. The retreat comes after an early cease-fire agreement between Iran and Israel, which deflated much of the geopolitical risk premium.
Notwithstanding, the market remains delicately balanced. OPEC+ is hinting at a possible output increase, while U.S shale producers stand ready to expand production where prices remain favourable. However, analysts at Goldman Sachs and HSBC maintain that a flare-up in global tensions could push Brent crude back above $80 in the coming months.
In essence, the decline from $80 to $65–$68 is less of a collapse and more of a recalibration. Demand remains steady, but without the urgency of geopolitical threats or supply squeezes. Any sustained return to $70+ will likely require fresh geopolitical shocks or structural supply disruptions.
In the near term, we anticipate more strategic issuances and controlled yield management as authorities continue to balance inflation control, debt servicing efficiency, and macroeconomic expectations.
For oil, it goes without saying that, in this environment, wisdom lies in discernment. Investors who act with foresight, rather than emotion, will find better footing amid the crosscurrents shaping Nigeria’s fixed income and macroeconomic story.
Nigeria’s finance and investment industry outlook has turned optimistic following the signing of the new tax reform bill into law. The legislation is designed to streamline tax collection, ease compliance for responsible businesses, and create a more investor-friendly environment. These reforms will also enhance investor confidence, stimulate growth in non-oil sectors, and improve overall tax administration.
Regarding the financial system, the proposed tax reforms signal improved fiscal transparency and could lead to increased capital inflows, especially in sectors previously hindered by complex or excessive tax burdens. However, the full benefits hinge on effective implementation, bridging regional disparities, and building trust in the tax system. When executed, the reform could stimulate sustainable growth and deepen Nigeria’s financial markets.
The Big Question: “Taxation”
The new tax law has just been announced. Low-income earners and small business owners seem hopeful, but is this hope justified?
Has the harsh approach to tax collection truly ended? Is a fairer system now in place?
If so, starting a small business may no longer come with the fear of losing money before making any profit. People may now pursue their business goals more confidently. Foreign investors might also be encouraged to explore the market. We could all have a piece of the “Nigerian dream!”
There’s talk of more job opportunities and tax incentives for low-income earners. But the real issue is implementation.
Will the law be applied as intended, or will new levies emerge under a different name? Tax collectors still have targets; will those targets reflect the new policy?
That’s the big question.
