May concluded with significant developments in Nigeria’s fixed income markets. The Debt Management Office (DMO) recently conducted and concluded a ₦300 billion Sovereign Sukuk auction, while the outcomes of the Federal Government of Nigeria (FGN) bond, Nigerian Treasury Bills (NTBs), and Open Market Operations (OMO) auctions provided substantial insight into current market dynamics, hinting at a possible downward shift in yields.
In parallel, the President’s recent request for parliamentary approval of a $21.5 billion foreign borrowing plan introduces new variables into the fiscal policy outlook, with implications for debt sustainability and macroeconomic planning.
As June begins, several coupon payments and maturities on Nigerian Treasury Bills (NTBs) and OMOs are expected. Market participants are also watching closely for potential shifts in yield direction.
In the week under review, system liquidity improved, and the money market opened on Friday with a surplus of over ₦1.899 trillion. Consequently, short-term borrowing rates showed modest changes: with the Overnight (O/N) rate slightly rising to 26.95% from the previous week’s 26.92%, while the Open Repo Rate (OPR) increased to 26.50% from the previous week’s 26.42%. Meanwhile, the Naira fluctuated between a high of $/₦1,595.00 on Wednesday and a low of $/₦1,578.00 on Monday, closing at $/₦1,585.50 on Friday.
At the May 2025 FGN Bond auction held last Monday, the DMO reopened the 19.30% FGN APR 2029 and the 19.89% FGN MAY 2033 instruments in a ₦300 billion capital raising effort. However, the disparity in investor response between both instruments was striking. Notably, these bonds will not be on auction this month as the DMO plans to introduce a new 5- and 7-year tenor.
For the APR 2029 bond, the DMO offered ₦100 billion, yet received only ₦16.443 billion in total subscriptions. That was an alarmingly low turnout by any standard. From this, the DMO allotted just ₦4.705 billion. The stop rate settled at 18.980%, slightly below its coupon, and 2 basis points lower than April’s level. This result suggests investor caution towards the shorter tenor, possibly due to dissatisfaction with the rate offered.
In a sharp contrast, the MAY 2033 bond attracted significant demand. Against a ₦200 billion offer, the auction attracted a staggering ₦419.964 billion in subscriptions, more than double the offer size. This reflects a clear show of market confidence in the longer-duration instrument or, perhaps more accurately, a yield-seeking pivot among institutional investors. The DMO clearly took advantage of the strong demand, and allotted ₦295.988 billion, nearly 48% above its offer size. The stop rate came in at 19.849%, slightly below the coupon of 19.89%, and 14 basis points lower than the last auction.
In the secondary market, offers were seen for the MAY 2033 bond at around 19.55%. The overwhelming demand for the MAY 2033 instrument indicates a continued hunger for yield, particularly among investors such as pension funds and insurance firms, who are better positioned to absorb longer-term risk.
BONDS TENOR | APRIL 2029 | MAY 2033 |
AUCTION DATE | 26-05-2025 | 26-05-2025 |
SETTLEMENT DATE | 28-05-2025 | 28-05-2025 |
MATURITY DATE | 17-04-2029 | 15-05-2033 |
TENORS | 5-YEAR | 9-YEAR |
AMOUNT OFFERED (₦) | 100 BILLION | 200 BILLION |
SUBSCRIPTION (₦) | 16.443 BILLION | 419.964 BILLION |
AMOUNT ALLOTTED (₦) | 4.705 BILLION | 295.988 BILLION |
STOP RATES (%) | 18.9800 | 19.8490 |
PREVIOUS STOP RATES (%) | 19.0000 | 19.9900% |
The first Open Market Operations (OMO) auction of the week conducted on May 26, the same day as the bond auction, revealed a divided market appetite across the offered maturities, showing both selective investor participation and policy-driven liquidity dynamics.
Two tenors were on offer: a 106-day bill maturing September 9, 2025, and a relatively longer 169-day bill maturing November 11, 2025. Each of both papers were offered at ₦300 billion, yet the market’s response distinctly varied.
The shorter 106-day instrument witnessed a weak subscription of just ₦63.50 billion, barely 21% of the offer size. Of this, only ₦44.50 billion was allotted with the stop rate of 23.59%. Despite the rate being somewhat high, market participants opined that it is somewhat fair since this instrument is for a short tenor. It also suggests investors reluctance to lock in funds at the offered rates for such a short duration, amidst an environment characterised with monetary policy uncertainty.
In contrast, the 169-day bill was massively oversubscribed with ₦1.083 trillion in bids, more than 3.5 times the initial offer. This robust demand was fully accommodated by the Central Bank, as the entire ₦1.083 trillion was allotted at a stop rate of 24.50% which also doubles as the upper limit of the bid range. The CBN’s decision to soak up the entire subscription in this tenor points to a deliberate move to mop up excess liquidity while locking in funding at relatively high, yet controlled yield levels. From the investor’s perspective, the longer tenor may have been more appealing due to higher rates and the opportunity to secure a better return.
TENOR | AUCTION DATE | OFFER (₦’ B) | BIDS (₦’ B) | RANGE OF BIDS (%) | STOP RATES (%) | PREVIOUS STOP RATES (%) | TOTAL SALE (₦’ B) |
106-DAY | 26-05-2025 | 300.00 | 63.50 | 22.9900-25.4660 | 23.5900 | 23.7700 | 44.50 |
169-DAY | 26-05-2025 | 300.00 | 1,083.10 | 23.0000-24.5000 | 24.5000 | 23.9800 | 1,083.10 |
Two days later, on May 28, 2025, another OMO auction mirrored similar structure of the prior auction. For the 104-day bill, the Central Bank offered ₦300 billion. Bids came in modestly higher than the previous short tenor, ₦85 billion this time, compared to ₦63.5 billion two days earlier. But the outcome was stark: the CBN accepted only ₦1 billion. This wasn’t just caution; it was a clear signal. The apex bank had no interest in soaking up short-term money unless it came at precisely the rate it liked. The stop rate printed at 23.60%, barely a tick above the 23.59% set on May 26.
Conversely, the 139-day paper was a different story. Offered at the same ₦300 billion, it drew over ₦600 billion in demand, just like the 169-day from earlier in the week that attracted more than a trillion Naira. The CBN eventually sold ₦481.33 billion at a stop rate of 24.980%, just 2 basis points below 25% levels. That jump in yield points to the fact that the market wants more compensation for time, and it is starting to demand it more assertively.
Looking across both auctions, the broader pattern is clear: short-dated OMO bills are largely being ignored; it is not just from rate disinterest, but likely due to a mismatch between investor preference and issuance strategy. Buyers either want higher rates for the shorter tenor or simply prefer to position longer where returns are more attractive and less vulnerable to reinvestment risk.
Some argue that with only 35 days separating these maturities, reinvestment risk is minimal. However, the questions remain: is there a large maturity event in August versus September that’s influencing this bid behaviour?
TENOR | AUCTION DATE | OFFER (₦’ B) | BIDS (₦’ B) | RANGE OF BIDS (%) | STOP RATES (%) | PREVIOUS STOP RATES (%) | TOTAL SALE (₦’ B) |
104-DAY | 28-05-2025 | 300.00 | 85.00 | 23.4900-25.0000 | 23.6000 | 23.5900 | 1.00 |
139-DAY | 28-05-2025 | 300.00 | 602.13 | 24.0000-25.9800 | 24.9800 | 24.5000 | 481.33 |
The Debt Management Office (DMO) has successfully offered the Series VII Sovereign Sukuk with a target of ₦300 billion. Remarkably, the subscription for this issuance soared to over ₦2.205 trillion, an extraordinary oversubscription rate of over 700%.
The Nigerian fixed income market is set for a major injection of liquidity in June, with over ₦2 trillion expected to flow into the system from various maturity and interest obligations. This inflow will stem from bond coupon payments, Nigerian Treasury Bills (NTBs), and Open Market Operations (OMO) maturities, all of which could shape short-term interest rate dynamics.
Government bondholders are in line to receive over ₦210 billion in coupons this month. These payouts, representing biannual coupon payments on June 2033s, 2038s, and 2053s instruments, will boost liquidity among key institutional investors.
Also, NTB maturities for the month are projected to exceed ₦710 billion. As these short-term instruments roll off, banks and other liquidity-focused investors will have fresh capital to redeploy. The OMO space is equally expected to see the largest volume of maturities, with over ₦1 trillion set to return to the market. This level of liquidity injection poses a significant test for the Central Bank of Nigeria (CBN), particularly as it aims to balance price stability with market confidence.
This scale of liquidity movement will influence investor strategy across the curve. If inflation expectations become high or foreign exchange pressures escalate, we could see more aggressive liquidity tightening through OMO reissuance.
In other news, President Bola Tinubu has requested parliamentary authorisation to secure over $21.5 billion in new external financing as part of Nigeria’s 2025–2026 borrowing programme, aimed at bridging funding gaps and accelerating economic growth. His formal communication to the National Assembly also included a request for the approval of €2.2 billion and ¥15 billion in additional foreign loans, alongside a $2 billion domestic borrowing component.
While the administration justifies the borrowing as essential for financing infrastructure projects, critics argue that the rapid accumulation of debt may exacerbate inflationary pressures and undermine investor confidence. The proposed loans are intended to fund projects in sectors such as healthcare, education, agriculture, and infrastructure, with the goal of generating employment, promoting skill acquisition, and enhancing food security.
The timing of the borrowing request, shortly after the repayment of a $3.4 billion IMF loan, has sparked debates about fiscal discipline and the government’s borrowing strategy. While the leadership views the repayment as a sign of financial prudence, critics question the rationale behind incurring new debt so soon after clearing existing obligations. Altogether, the proposed borrowing package is set to account for roughly 60% of the planned expenditure in the 2025 national budget.
Moody’s upgraded Nigeria’s credit rating from Caa1 to B3 on May 30, 2025, due to improved fiscal management, better external reserves, removal of oil subsidies, and successful economic reforms. This upgrade is expected to boost investor confidence, lower borrowing costs, and also to attract more foreign investment, positively impacting Nigeria’s financial markets and supporting economic growth.
Given the size and timing of the upcoming maturities and coupon inflows (over ₦2 trillion in June alone) many market participants are rightly anticipating a potential inflection point in yield direction. The question now is whether yields will compress under the weight of excess liquidity or remain elevated due to policy tightening and macroeconomic headwinds.
Ordinarily, the volume of liquidity expectations would suggest downward pressure on yields. When investors receive that much cash at once, they don’t just let it sit idle. The natural tendency is to reinvest, especially institutional players bound by regulatory or portfolio mandates.
This creates tension; on one side, excess liquidity chasing limited supply could push yields down. On the other, aggressive OMO issuances and tighter auction stop rates could keep yields elevated. The direction will ultimately depend on which force proves stronger—market liquidity or central bank resolve.
The concern remains if yields direction will change. Although this is a possibility, the change may not be in a single, clear direction. Traders will ride the short end for quick wins, while institutional investors may take a wait-and-see stance at the long end. But one thing is certain: the tone in the bond and bill markets is changing.
In the near term, both oil and cryptocurrency markets are likely to remain subject to heightened volatility. After an extended period of gains, current price movements suggest a potential reversal or, at best, a consolidation phase characterised by range-bound trading. Market participants appear cautious, with sentiment shifting amid mixed signals from global macroeconomic indicators and risk-off positioning. Notably, the trajectory of geopolitical tensions in the Middle East continues to inject uncertainty into the outlook, acting as a potential catalyst for sharp movements in either direction. As such, sustained stability in these markets remains contingent on both external and evolving investor sentiment.
Quotes
Are We Still Attractive?
We are a lucrative, untapped land.
A prize in the eyes of every investor, both local and international.
Foreign investors remain glued to their screens, watching Nigeria’s next move. They all want a slice of the pie.
One of the recent attractions? The repayment of an IMF loan.
But wait—are we borrowing again? And even more this time?
For infrastructure and other related aspects.
Will this raise our value?
Will interest rates or foreign exchange rates spike?
Will we remain attractive to foreign investors—or will they begin to turn away, quietly withdrawing?
Just as they have done before?
