Investors Appetite Shifts To Long-Term Bond

Investors behaviour in Nigeria’s bond market has shifted for a long term instrument following the preference for the longer-dated instruments, particularly the 9-year bond, despite marginally lower yields.

In May 2025, the 5-year federal government bond witnessed a sharp collapse in demand, highlighting growing caution toward shorter-term sovereign debt.

Data from the Debt Management Office (DMO) reveal that the 5-year FGN APR 2029 bond attracted only N16.44 billion in bids, compared to an offer size of N100 billion — an 83.56 per cent undersubscription rate. This represents a deeper dip from April, when the same bond saw N43.79 billion in bids against a N200 billion offer.

Only N4.71 billion worth of the 5-year bond was allotted in May, a significant drop from April’s N21.13 billion.

The number of bids also declined by nearly half, from 35 to 19, with just 11 deemed successful. This occurred despite a near-stable yield, with the marginal rate easing slightly to 18.98 per cent in May from 19.00 per cent in April.

Market watchers suggest that investors are growing wary of the risks tied to short-term exposure amid uncertainties surrounding inflation, monetary policy direction, and liquidity constraints. The 5-year bond, maturing in April 2029, now offers less than four years to maturity — a horizon that may be deemed insufficient to hedge against inflation volatility and policy unpredictability.

In contrast, the 9-year FGN MAY 2033 bond continued to benefit from investor trust. Subscriptions reached N419.96 billion — more than double its N200 billion offer. Despite a small reduction in its marginal rate to 19.85 per cent from April’s 19.99 per cent, investor appetite remained robust.

A total of N295.99 billion was allotted for the 9-year bond in May, slightly below the N376.77 billion issued the previous month. While the number of bids also fell from 189 in April to 141 in May, 86 were successful, reflecting sustained demand. The yield bid range, between 15.00 per cent and 21.43 per cent, underscores persistent interest in locking in long-term yields.

With maturity set for May 2033, the bond offers an 8-year investment window. Analysts interpret the shift toward longer-dated instruments as a signal that investors are seeking stability, preferring to tie up capital in assets that offer inflation protection and less exposure to near-term macroeconomic shocks.

This growing divergence in investor preference marks a crucial turning point in Nigeria’s domestic debt market, as confidence in the short end of the yield curve wanes amid evolving economic conditions.