The first FGN Bond auction for 2025 set to take place on Monday is expected to draw significant interest from both local and foreign investors. The Nigerian government has announced that it will be offering a whopping N450 billion in bonds, split across three maturities: N100 billion for the April 2029 bond, N150 billion for the February 2031 bond, and N200 billion for a new 10-year bond, maturing in January 2035. These new issues are coming after a year marked by sky-high yields.
The re-emergence of Donald Trump as the 47th president of the United States of America has sent ripples through global financial markets, with analysts keenly observing his every move, especially concerning his approach to economic policy. Trump made his return to the Oval Office after a period of intense speculation. As expected, his first few days have been characterised by signing several executive orders and policy directives.
In the week under review, the Naira fluctuated between a high of $/₦1,565.00 on Wednesday and a low of $/₦1,515.00 on Friday, closing at $/₦1,531.00 on Friday. In the money market, liquidity surged to a surplus of over ₦210 billion, a sharp contrast to the previous week’s ₦390 billion deficit. The liquidity surge was due to the coupon payments that came in for some securities during the week. However, short-term borrowing rates saw a notable decline, with the O/N rate dropping to 27.50% and OPR to 27.00%, down from the previous week’s 32.75% and 32.33%, respectively.
The result of the second NTBs auction for 2025 has left many market observers with more questions than answers, as it defied expectations in several ways. The Debt Management Office (DMO) successfully sold over N750 billion worth of treasury bills, even though it had only originally offered N530 billion. This surge in allotment—over N200 billion more than offered—indicates a greater propensity to borrow than observed at the previous auction where the offer and allotment volumes were exact, reflecting a more conservative approach.
Interestingly, the stop rates for the 91-day and 182-day tenors remained unchanged at 18.00% and 18.50%, respectively. These levels have become somewhat of a benchmark for the market. However, there was a decline again for the 364-day tenor; the 364-day bills fell from 22.62% to 21.80%, following a slight drop from 22.80% at the last auction of 2024.
It is worth noting that this decline in the 364-day tenor is not necessarily a sign of optimism about the broader economic environment. Whether the trend continues in subsequent auctions will be critical to determining whether Nigeria’s debt strategy will face more challenges as 2025 unfolds or whether the market will continue to show signs of confidence in the government’s ability to manage inflation and fiscal stability in the longer term.
AUCTION DATE | 22-01-2025 | 22-01-2025 | 22-01-2025 |
ALLOTMENT DATE | 23-01-2025 | 23-01-2025 | 23-01-2025 |
MATURITY DATE | 24-04-2025 | 24-07-2025 | 22-01-2026 |
TENOR | 91-DAY | 182-DAY | 364-DAY |
OFFER (₦) | 50,000,000,000 | 80,000,000,000 | 400,000,000,000 |
SUBSCRIPTION (₦) | 26,533,944,000 | 17,910,346,000 | 2,490,859,631,000 |
ALLOTMENT (₦) | 26,449.994,000 | 17,088,846,000 | 712,476,066,000 |
STOP RATES (%) | 18.0000 | 18.5000 | 21.8000 |
PREVIOUS STOP RATES (%) | 18.0000 | 18.5000 | 22.6200 |
Looking back at the final bond auction in 2024, the 5-year bond closed at 21.14%, up from 21.00% in November, while the 7-year bond held steady at 22.00%. These high rates were reflective of the general market sentiment—investors were seeking higher returns to compensate for inflationary pressures and uncertainty about the country’s fiscal outlook. With inflation stubbornly in the double digits, alongside the complexities surrounding government policies and foreign exchange liquidity, bond yields have to offer a substantial premium to attract investors, but it’s still far from being able to do so.
As we enter 2025, the new 10-year bond on offer—the January 2035 maturity—will likely see yields higher than the previous rates due to the prevailing economic conditions and inflationary trends. Given the ongoing liquidity constraints and the general demand for higher returns to combat inflation, the new bond could become the new highest-issued coupon bond in the fixed-income market.
This first bond auction of 2025 will thus likely serve as an early barometer for the year ahead, giving both local and foreign investors a glimpse into what lies ahead for the Nigerian financial markets. How it plays out will give us a clearer picture of whether the country is on a path to stability or whether the bond market will continue to reflect the deep-rooted economic concerns that have challenged it for years.
Last Thursday, a comprehensive report on Nigeria’s macroeconomic outlook for 2025 was launched, with insights into the country’s economic reform trajectory. This reflects the urgency for Nigeria to stabilise its economy while navigating a critical phase of transition following significant reforms initiated in mid-2023.
The analysis highlights that stabilising Nigeria’s economy amidst these reforms is far from straightforward. A major challenge remains the country’s continued dependence on oil revenues, which exposes it to factors such as fluctuations in oil prices, global demand, and geopolitical tensions. All of these complicate efforts at stabilisation. Despite these challenges, the report conveys cautious optimism, emphasising that with sound fiscal policies and ongoing efforts to enhance the business environment, Nigeria can navigate the current difficulties and emerge more resilient in the long run.
On the global stage, before Trump’s official re-election and return to office, there had been much discussion around the prospect of tariffs. With the US economy facing pressures from inflation, supply chain disruptions, and geopolitical instability, many are bracing for a return that could have significant implications for international trade dynamics. These policies may impact global markets and send shockwaves through African economies, including Nigeria, which has historically been dependent on oil exports and is now looking to diversify its economic base.
Trump’s unpredictable stance on foreign aid and trade agreements could lead to a restructuring of key trade partnerships where access to affordable goods and capital is crucial for growth. The Nigerian economy, still recovering from previous recessions and having to deal with high inflation and a weakened Naira, could feel the effects of tightening trade relations between the US and Africa.
From a financial markets perspective, Trump’s re-election could introduce volatility into the global markets. For Nigerian investors, this could mean more challenges in terms of foreign exchange liquidity and the stability of the Naira. Additionally, rising global interest rates, in response to Trump’s economic agenda, could make borrowing costs more expensive for Nigerian businesses and the government, placing further strain on the country’s economic recovery. For Nigerian policymakers, the challenge will be in navigating these potential external burdens while strengthening the nation’s internal economic outlook.
Going by the recent trend, the Naira seems to be fairly stable and strengthening. Despite progress made, however, market analysts remain cautious in view of global headwinds to come, particularly given the much anticipated descent in oil prices as a consequence of President Trump’s aggressive drive. We expect the CBN to be consistent in its efforts to uphold its price stability mandate.
The bond auction today is likely to mop up cash in the system and throw the market into a deficit. Money market rates are expected to remain elevated in the coming weeks.
Both cryptocurrencies and oil prices are likely to be under pressure in the days ahead as the Trump effect gradually kicks in across markets. Without a doubt, there will be extreme volatility across all markets.
