The Debt Management Office (DMO) faced less investor enthusiasm at the April bond auction as the market remained cautious over a possible rate hike by the Central Bank of Nigeria (CBN).
Total bids were fewer than those of the previous month, with investors bidding a total of N495.95 billion on both five-year and nine-year bonds compared to N531 billion in March.
“The decline in demand might be a result of investors taking a wait-and-see approach to see if policy rates will adjust upwards as inflation printed upwards in March, which might give room to invest at higher yields other than locking in now,” Tunde Abidoye, analyst at FBNQuest Merchant Bank, said.
Nigeria’s inflation trajectory reversed in March, rising to 24.2 percent from 23.2 percent in February. The March print may lower the odds for a rate cut at the May 2025 MPC meeting.
The market was liquid, with transactions standing at N1.63 trillion on Monday, the day of the auction. The rates on the five-year (Apr 29s) bond dropped by 30 basis points compared to borrowing costs one year ago. It dropped from 19.30 percent in April 2024.
The rates on the federal government bonds have consistently declined steadily since February 2025, when inflation fell to 24.4 percent after its methodology was changed.
However, rates remained the same as it was in March. Total demand at the auction on Monday was higher than the previous month, with bids amounting to N495.95 billion, compared with N531 billion in March.
The auction included two offerings: a N200 billion re-opened five-year savings bond, maturing in April 2029, and a N100 billion re-opened nine-year savings bond, maturing in May 2033.
The DMO sold a total of N397.89 billion across both offers. On the five-year bond, the DMO sold N21.12 billion at a yield of 19.0 percent, which is the same as the last auction.
The nine-year bond got the most investors’ attention, seeing more than double its offer. However, only N376.77 billion was sold at a yield of 19.99 percent.
Total FGN bond sales hit N2.44 trillion year-to-date. FGN bond sales in the first quarter (Q1) have trailed 2024 levels, despite a larger budget deficit in 2025.
The second quarter (Q2) of 2025 will likely serve as a catch-up period, with the DMO expected to maintain its usual five-year, seven-year, and possibly 10-year bond offerings.(BusinessDay)
