The Federal Government borrowed N5.08 trillion from the domestic bond market in the first half of 2026, representing a 77.8 per cent increase from the N2.86 trillion raised during the corresponding period of 2025.
An analysis of Debt Management Office (DMO) auction results showed that the government ramped up domestic borrowing between January and June despite a decline in borrowing costs, while investor demand remained strong.
The DMO offered N4.95 trillion worth of bonds during the six-month period, up from N1.85 trillion in the first half of 2025, reflecting a significant expansion of its domestic borrowing programme.
Investor appetite also strengthened, with total subscriptions rising to N9.04 trillion from N4.37 trillion recorded a year earlier. Although demand more than doubled, the subscription-to-offer ratio declined as the volume of bonds issued increased substantially.
The government recorded its highest borrowing in January, raising about N1.68 trillion, while June followed with N1.22 trillion. May also posted strong borrowing after the DMO allotted N894.51 billion, boosted by a N280 billion non-competitive allocation.
Average borrowing costs, however, declined during the period. Marginal rates on bond instruments ranged between 15.50 per cent and 18.35 per cent, compared with 17.75 per cent to 22.60 per cent in the corresponding period of 2025.
The 22.60 per cent FGN January 2035 bond remained the government’s largest funding instrument, attracting subscriptions of about N2.3 trillion and accounting for N1.52 trillion in allotments across four reopening auctions.
Similarly, the 16.2499 per cent FGN April 2037 bond generated subscriptions exceeding N1.24 trillion after it was introduced in May and June.
The surge in domestic borrowing came as foreign investors also increased their exposure to Nigerian bonds. According to the National Bureau of Statistics, bond investments reached $3.23 billion in the first quarter of 2026, driven by high yields and improving confidence in the foreign exchange market.
Economic analysts, however, warned that the government’s increased reliance on domestic borrowing could crowd out private sector lending.
Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, said banks were increasingly favouring government securities because of their attractive returns and lower risk, reducing credit available to businesses.
He also cautioned that while higher yields had attracted foreign portfolio investors, they were increasing the country’s debt servicing burden and called for greater use of public-private partnerships to finance infrastructure instead of additional borrowing.
Market analysts at Coronation Asset Management projected that bond yields would remain elevated through the third quarter of 2026, citing persistent inflation, tight monetary policy and fiscal pressures.
The firm expects long-term bond yields to remain within the 17.5 to 19 per cent range unless inflation eases significantly or the Central Bank of Nigeria begins cutting interest rates later in the year.
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