DMO plans N5.75trn bond sale as government borrowing pressures persist

THE Debt Management Office (DMO) plans to raise N5.75 trillion through the Federal Government of Nigeria (FGN) bond issuances in the fourth quarter of 2026, as the government’s rising financing needs threaten to sustain pressure on domestic interest rates.

According to a fixed-income market outlook by CSL Research, the planned issuance comprises N1.75 trillion in October and N2 trillion each in November and December.

The fresh offers will come after the government allotted N7.15 trillion in FGN bonds between January and September 2026, more than double the N3.48 trillion recorded in the corresponding period of 2025.

The rising issuance reflects the government’s substantial domestic financing requirements amid an expanded 2026 expenditure budget and persistent revenue shortfalls.

Analysts had earlier projected a fiscal deficit of N26.7 trillion, equivalent to 5.3 percent of gross domestic product (GDP), while estimating that net domestic borrowing could exceed N11.5 trillion in the second half of the year.

CSL Research said the additional bond supply could limit further declines in yields as investors demand competitive returns to absorb the government’s securities.

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Although the Central Bank of Nigeria’s 350-basis-point reduction in the Monetary Policy Rate (MPR) initially supported lower yields across Treasury bills and FGN bonds, rates have since rebounded, reflecting the influence of borrowing requirements and market liquidity on fixed-income pricing.

As of October 9, Treasury bill yields had risen by 10 basis points to 18 percent, while FGN bond yields increased by 30 basis points to 15.9 percent. Both, however, remained below their levels before the monetary policy adjustment.

The research firm warned that the planned fourth-quarter bond offers could sustain upward pressure on yields by increasing the supply of government securities.

However, it noted that N7.46 trillion in Open Market Operations (OMO) and Treasury bill maturities expected in October could support demand for fixed-income instruments as investors reinvest their proceeds.

The extent of this support would depend partly on fresh OMO issuance by the CBN, which could absorb some of the liquidity released by maturing instruments.

On the fiscal side, improved crude oil production offers the government a potential revenue boost, although the extent to which it reduces borrowing needs remains uncertain.

Nigeria’s crude oil and condensate production rose by 2.3 per cent month-on-month to 1.72 million barrels per day in September, from 1.68 million barrels per day in August, marking its highest monthly average since June.

Crude-only production averaged 1.53 million barrels per day, exceeding Nigeria’s OPEC quota of 1.50 million barrels per day for the fifth consecutive month.

The improvement, alongside elevated international oil prices, could strengthen export earnings and government revenue. However, the actual fiscal benefit will depend on production costs, the government’s share of oil proceeds and statutory deductions.

CSL Research cautioned that higher oil prices might not translate proportionately into stronger net oil receipts, meaning sustained production gains would need to generate additional government revenue to meaningfully reduce domestic borrowing requirements.

Against this backdrop, the firm maintained its preference for short-to-medium-duration fixed-income investments, arguing that the strategy would allow investors to benefit from prevailing yields while limiting exposure to potential repricing at the longer end of the yield curve.

The outlook suggests that although reinvestment demand and improved oil production could provide some support, sustained government borrowing is likely to remain a key factor shaping Nigeria’s fixed-income market in the final quarter of the year.