In the first quarter of 2025, investors in Federal Government bonds subscribed to a total of N2.83 trillion, a decrease from the N3.12 trillion recorded during the same period in 2024, as reported by the Debt Management Office (DMO).
This decline in subscription volume is attributed to a reduction in the number of bond offerings, as the government aimed to manage its borrowing in response to elevated interest rates.
During Q1 2025, the Federal Government issued N1.10 trillion in FGN bonds, a substantial drop from the N3.31 trillion offered in Q1 2024. This 66.8% reduction indicates a more cautious strategy, with the government choosing to issue fewer instruments at each auction while enhancing liquidity in the existing bonds.
The reduction in bond offerings in 2025, in comparison to the prior year, indicates a strategic transition by the Federal Government towards a more cautious approach to borrowing. This decision is in line with the prevailing high-interest rate climate, where the management of debt sustainability has become increasingly important.
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Marginal rates for bonds in the first quarter of 2025 reflect a market recalibration, with January 2025 exhibiting rates between 21.79% and 22.60%, a notable increase from the range of 15.00% to 16.50% observed in January 2024. By March 2025, these marginal rates had slightly decreased to a range of 19.00% to 19.99%, indicating a possible stabilization in interest rate expectations.
Even with a more conservative borrowing approach, investor demand remained strong, especially for medium- to long-term risk-free instruments such as the 7-year and 10-year bonds, which continue to appeal to institutional investors due to their suitability for long-term liabilities. The strategy of the Debt Management Office (DMO) also facilitates price discovery in the secondary market while ensuring the maintenance of benchmark bonds across essential maturities.
