Nigeria’s bond market saw yields climb sharply this week after the Debt Management Office (DMO) increased stop rates across all maturities in its December bond auction, signalling a renewed tightening stance to attract investors and manage rising borrowing costs.
At the auction, the DMO raised rates on the 2031, 2038 and 2050 Federal Government of Nigeria (FGN) bonds, drawing strong investor interest despite broader concerns around inflation and fiscal pressures. Market analysts say the upward adjustment reflects government efforts to deepen market participation while aligning yields with prevailing macroeconomic realities.
Dealers in Lagos told ORIMIXTIMES that yields on benchmark bonds spiked in the secondary market following the DMO’s pricing, with some maturities advancing by more than 40 basis points as traders repositioned ahead of year-end liquidity flows.
“The DMO is clearly responding to market signals. Investors have been asking for higher yields to compensate for inflationary risk, and the December auction provided exactly that,” said one fixed-income trader with a Tier-1 investment bank.
Total subscription levels remained robust, underscoring continued investor appetite for government securities despite the higher rate environment. Analysts attributed the strong demand to pension funds, banks, and asset managers seeking safe-haven instruments amid volatility in equities and currency markets.
Economists say the government’s decision to raise borrowing costs could help stabilise the naira by attracting offshore portfolio flows, although it also increases debt-servicing obligations in 2025.
“With headline inflation still elevated and monetary tightening expected to continue into the first quarter of next year, the DMO has limited room to keep rates artificially low,” noted an Abuja-based economist. “The market response shows a clear preference for realistic pricing.”
The December auction caps a year of aggressive yield adjustments across Nigeria’s debt curve, driven by reforms, inflationary pressure and efforts to restore investor confidence. Market participants expect yields to remain elevated in the near term as fiscal authorities prepare the 2025 borrowing plan and the Central Bank of Nigeria maintains its tight policy stance.
The DMO is expected to release its first-quarter 2025 issuance calendar in January.
