Investor interest in Nigeria’s 5-year Federal Government bond collapsed in May 2025, with the offer undersubscribed by 83%, signaling a sharp shift in market sentiment compared to the previous month.
The auction result, published by the Debt Management Office (DMO) and obtained by Nairametrics, showed that while the 9-year bond maintained strong investor demand, the shorter 5-year paper saw dramatically reduced interest amid a slight dip in the marginal rate.
The auction, conducted on May 26, 2025, reopened two instruments: the 19.30% FGN APR 2029 (5-Year Bond) and the 19.89% FGN MAY 2033 (9-Year Bond).
Short-term bond falters as investors stay away
The 5-year bond suffered a severe blow in investor confidence. From an offer size of N100 billion, the bond attracted just N16.44 billion in total bids, resulting in an undersubscription rate of 83.56%. This is the same trend from April 2025, when the same bond, then offered at N200 billion, attracted N43.79 billion in bids.
- In terms of allotment, only N4.71 billion was issued to investors in May, compared to N21.13 billion the previous month. The number of bids also declined sharply, from 35 bids in April to 19 bids in May, of which just 11 bids were successful.
- This lack of demand came amid a marginal reduction in yield. The marginal rate dropped slightly to 18.98% in May from 19.00% in April.
- With its maturity set for April 17, 2029, the bond now has 3 years and 11 months left to maturity, as investors may be growing wary of shorter-term exposure amid uncertainty around interest rates, liquidity pressures, and possible shifts in inflation expectations.
Longer-dated bond remains hot
- In contrast to the tepid interest in the 5-year tenor, the 9-year FGN MAY 2033 bond continued to enjoy strong patronage. Although the marginal rate edged down slightly from 19.99% in April to 19.85% in May, the instrument recorded N419.96 billion in subscriptions against an offer of N200 billion, a sign of continued confidence in longer-dated sovereign debt.
- The allotment for the 9-year bond in May stood at N295.99 billion, lower than April’s N376.77 billion, despite a higher offer size. The number of total bids also dipped from 189 in April to 141 in May, with 86 successful bids recorded.
- The bid range remained aggressive, between 15.00% and 21.43%, only marginally below the previous month’s high of 21.48%, showing that investor appetite remains resilient, albeit with some signs of recalibration.
- With a maturity date of May 15, 2033, the bond offers 8 years to maturity, and investors appear willing to lock in yields over the long term in exchange for stability and inflation protection.
What you should know
The fall in demand for the 5-year bond shows a shifting preference in the market toward longer-term instruments. The shorter end of the curve may be losing its appeal due to policy uncertainty and less attractive risk-adjusted returns.
Meanwhile, the sustained demand for the 9-year paper, even at slightly lower yields, reflects continued investor confidence in Nigeria’s long-term credit outlook and the allure of locking in high fixed income over a longer horizon.
From a funding strategy perspective, the DMO appears to have taken a conservative stance on allotments in May, especially on the 9-year bond, potentially to manage borrowing costs or reduce near-term repayment obligations.
