he Federal Government raised ₦5.08 trillion from the domestic bond market in the first half of 2026, marking a sharp increase from the ₦2.86 trillion raised during the same period in 2025.
Data from the Debt Management Office (DMO) showed the government increased domestic borrowing despite lower borrowing costs. At the same time, investors maintained strong demand for Federal Government securities.
Investor demand remains strong
According to the DMO’s auction results, total bond subscriptions climbed to ₦9.04 trillion between January and June 2026. The figure more than doubled the ₦4.37 trillion recorded during the corresponding period in 2025.
The government also expanded its bond offerings significantly. It offered ₦4.95 trillion worth of bonds during the review period, compared with ₦1.85 trillion a year earlier.
Although investor demand remained strong, subscriptions did not increase at the same pace as government borrowing. As a result, the subscription-to-offer ratio declined compared with the previous year.
Borrowing costs decline
The DMO data showed that marginal rates ranged between 15.50 per cent and 18.35 per cent in the first half of 2026. During the same period in 2025, the rates ranged from 17.75 per cent to 22.60 per cent.
Similarly, the average marginal rate fell to about 16.78 per cent from 19.84 per cent recorded a year earlier. The weighted average rate also declined, reflecting lower domestic borrowing costs.
January recorded the government’s highest borrowing during the period, while June ranked second after attracting another substantial bond issuance.
Economists warn over rising debt
The 22.60 per cent FGN January 2035 bond attracted the largest investor interest during the review period. Meanwhile, the 16.2499 per cent FGN April 2037 bond also recorded strong subscriptions after its introduction in May.
Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, warned that increased government borrowing could reduce credit available to private businesses.
“The increase in credit to the government can be attributed to a number of factors. The government has been raising money to finance the deficit.”
He added:
“The rate is also very attractive, and it’s more attractive to them than lending to the real sector.”
Yusuf also urged the government to reduce its reliance on borrowing. He said authorities should encourage more public-private partnerships to finance infrastructure projects instead of increasing public debt.
Analysts expect yields to remain high
Market analysts expect bond yields to remain elevated through the third quarter of 2026 because inflation remains persistent and monetary policy is still tight.
Coronation Asset Management said any major decline in yields is unlikely before the final quarter of the year unless inflation slows significantly or the Monetary Policy Committee adopts a more accommodative stance.
What happens next?
Investors will closely watch the July bond auction and the next Monetary Policy Committee meeting for fresh signals on interest rates and government borrowing. Meanwhile, analysts expect the Federal Government to maintain an active presence in the domestic bond market as it continues to finance its budget.
