The Federal Government borrowed a net N7.6 trillion from Nigeria's domestic debt market in the first six months of 2026, relying heavily on local investors to fund its budgetary commitments through Treasury bills and Federal Government of Nigeria (FGN) bonds. This was disclosed in a market review and outlook report by Cordros Securities, titled Nigeria in 2026: Recovery to Realignment.
Details of Domestic Borrowing
The Debt Management Office (DMO) raised N3.18 trillion through Treasury bills and N4.42 trillion via FGN bonds during the period. Cordros Securities described the scale of domestic borrowing as among the highest recorded in recent years.
Treasury bill issuances surged 59.8% year-on-year to N12.75 trillion, with total subscriptions reaching N38.67 trillion—nearly three times the amount offered. This was slightly above the 2.8 times subscription ratio recorded in the same period of 2025. Total allotments rose 68.9% to N14.36 trillion. The flood of new supply pushed average Treasury bill yields up by 106 basis points to 18.7% across the first half of the year.
Bond Market Performance
In the bond market, the DMO issued N4.95 trillion in FGN bonds, a 25.1% increase from the corresponding period in 2025. Total allotments grew 70.7% to N4.42 trillion, while total subscriptions stood at N8.76 trillion. However, the bid-to-offer ratio declined to 1.8 times from 2.2 times a year earlier, indicating subdued investor demand.
Cordros attributed the softer appetite to elevated interest rates and shifting expectations around the Central Bank of Nigeria's monetary policy direction. Heavy bond supply in June placed additional upward pressure on borrowing costs. Benchmark FGN bond yields rose 123 basis points to 17.8%, with short-term and medium-term bonds reaching 18.2% and 18.3% respectively, while long-term bond yields climbed more modestly to 16.2%. The March 2027, January 2035, and April 2037 FGN bonds recorded the sharpest individual yield increases.
Investor Participation and Foreign Inflows
Despite supply pressure, overall investor participation remained relatively firm, underpinned by ample system liquidity. Large volumes of Central Bank of Nigeria Open Market Operation (OMO) bills reaching maturity injected fresh funds into the financial system, sustaining demand at both primary auctions and in the secondary market. Although the apex bank issued new OMO bills to absorb excess liquidity, the net effect remained broadly supportive.
Foreign investors also contributed meaningfully, drawn by attractive yields on Nigerian fixed-income assets. According to National Bureau of Statistics data cited in the Cordros report, foreign inflows into the fixed-income market reached approximately $9.76 billion in the first quarter of 2026 alone.
Outlook for Second Half of 2026
Looking ahead, Cordros Securities cautioned that a continued mismatch between government financing requirements and investor capacity could keep yields high in the second half of 2026. The firm stated that while stronger foreign participation and easing geopolitical tensions may offer some relief, those factors would only moderate, rather than reverse, the effect of sustained large-scale borrowing, leaving market conditions volatile through the remainder of 2026.
Earlier reports indicated that Lagos and Rivers States emerged among the top indebted subnational governments in Nigeria, as new data from the DMO showed a sharp rise in both domestic and external debt between 2024 and 2025. Total external debt rose to $51.81 billion in 2025 from $45.78 billion in 2024, while domestic debt across the 36 states and the Federal Capital Territory increased to N4.36 trillion from N3.97 trillion.
