Quick Summary: FGN bond subscriptions fell to N2.83 trillion in Q1 2025, down from N3.12 trillion in Q1 2024, as the government reduced bond offers amid high interest rates. Despite lower volumes, investor demand remained strong, particularly for medium- and long-term bonds.
FGN Bond Subscriptions Drop to N2.83 Trillion in Q1 2025 as Offer Volume Declines
Subscription Decline in Q1 2025
Investors in Federal Government bonds subscribed to a total of N2.83 trillion in the first quarter of 2025, a decline from the N3.12 trillion recorded in the same period of 2024. This is according to data released by the Debt Management Office (DMO).
The lower subscription volume is linked to a reduction in bond offers, as the government took a more cautious borrowing approach amid high interest rates. Despite this decline, the total amount allotted stood at N1.94 trillion, reflecting a 23% drop from the N2.52 trillion allotted in Q1 2024.
Market Response to Lower Offers
January 2025 Auction Results
In January 2025, the government offered N450 billion across three bond instruments:
- 5-year 19.30% FGN APR 2029
- 7-year 18.50% FGN FEB 2031
- New 10-year 22.60% FGN JAN 2035
Investors placed bids worth N669.94 billion, leading to an allotment of N601.04 billion. In comparison, January 2024 saw an offer of N360 billion, with total subscriptions reaching N604.56 billion and allotments of N418.2 billion. Notably, there was no non-competitive allotment in January 2025, meaning all funds were raised through competitive bidding.
February 2025 Auction Results
By February 2025, the government reduced its offer volume to N350 billion, allocated between the 5-year and 7-year bonds. Despite the lower offer, demand surged to N1.63 trillion, exceeding expectations. The DMO allotted N910.39 billion, reflecting a more conservative stance compared to February 2024, when the government offered N2.5 trillion and allotted N1.495 trillion. The high activity in February 2024 was driven by a single massive offer.
March 2025 Auction Results
In March 2025, the government offered N300 billion for two bonds:
- 5-year 19.30% FGN APR 2029 (re-opening)
- 9-year 19.89% FGN MAY 2033
Subscriptions reached N530.31 billion, with an allotment of N423.68 billion. A significant portion of this amount—N152.45 billion—came from non-competitive allotments, highlighting strong interest from institutional investors like pension funds. In comparison, March 2024 saw an offer of N450 billion, total subscriptions of N615.01 billion, and allotments of N475.66 billion.
Adjusting to Market Dynamics
The decline in bond offers in 2025 suggests a strategic shift by the Federal Government toward more restrained borrowing. This aligns with the prevailing high-interest rate environment, emphasizing debt sustainability.
Marginal rates across bonds in Q1 2025 indicate market adjustments, with January 2025 rates ranging from 21.79% to 22.60%, significantly higher than the 15.00% to 16.50% range recorded in January 2024. By March 2025, marginal rates eased slightly to between 19.00% and 19.99%, suggesting a possible stabilization of interest rate expectations.
Investor Sentiment Remains Strong
Despite the government’s conservative borrowing stance, investor demand remained robust, particularly for medium- to long-term risk-free assets. The 7-year and 10-year bonds continued to attract institutional investors due to their alignment with long-term liabilities.
The DMO’s strategy also supports price discovery in the secondary market while maintaining benchmark bonds across key tenors. In total, the Federal Government offered N1.10 trillion in FGN bonds in Q1 2025, a significant reduction from the N3.31 trillion offered in Q1 2024. This 66.8% decrease reflects a cautious approach, with the government opting to issue fewer instruments per auction while deepening liquidity in existing bonds.
