FG borrows N7.6 trillion from domestic market in six months via Treasury bills, bonds

The Federal Government borrowed a net N7.6 trillion from Nigeria's domestic debt market between January and June 2026, relying heavily on local investors to fund its budget. The figure came from a market review and outlook report by Cordros Securities, titled 'Nigeria in 2026: Recovery to Realignment'.

Treasury bill issuances surge 59.8%

The Debt Management Office (DMO) raised N3.18 trillion through Treasury bills and N4.42 trillion via FGN bonds over the six-month period. Treasury bill issuances climbed 59.8% year-on-year to N12.75 trillion, with total subscriptions reaching N38.67 trillion. That was nearly three times the volume offered and 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 activity and rising yields

Activity in the bond market followed a similar pattern, though investor demand was comparatively subdued. 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. Total subscriptions stood at N8.76 trillion, with the bid-to-offer ratio declining to 1.8 times from 2.2 times a year earlier.

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%. Short-term and medium-term bonds reached 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.

Foreign inflows and outlook for second half

Despite the supply pressure, overall investor participation remained relatively firm, underpinned by ample system liquidity. Large volumes of CBN 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. Foreign investors also contributed meaningfully, drawn by attractive yields. National Bureau of Statistics data cited in the Cordros report put foreign inflows into the fixed-income market at approximately $9.76 billion in the first quarter of 2026 alone.

Looking to the second half of 2026, Cordros Securities cautioned that a continued mismatch between government financing requirements and investor capacity could keep yields high. The firm said 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 the year.

For the naira and Nigerian businesses, the continued reliance on domestic borrowing at elevated yields means that government borrowing costs remain high, which could crowd out private sector credit and keep interest rates elevated, squeezing business margins and consumer spending.