Kayode Tokede

As the federal government continue to borrow from domestic investors to bridge 2025 budget deficit, the government’s exposure to FGN Savings bond grew by 6.27 per cent Year-on-Year (YoY) to N36.23 billion in nine months of 2025 as against N34.09 billion in nine months of 2024. 

THISDAY analysis of trading numbers revealed that FGN Savings bond auction during the period under review witnessed sharp increase in investors’ patronage.

The Debt Management Office (DMO) in 2017 launched FGN Savings bond for retail investors that guaranteed interest payment and repayment of the principal.

Furthermore, the FGN Savings bond was introduced to deepen the nation’s savings culture, diversify funding sources for the government and it is issued monthly in tenors of 2 and 3 years.

The government projects to borrow approximately N13 trillion from bonds in 2025 to finance its projected budget deficit, with a significant portion expected to be raised in the first half of 2025 through a mix of new and re-opened bonds.

A quarterly breakdown of domestic investors’ investment in the FGN Savings bond showed N12.95 billion outlay in Q1 2025, about 76 per cent YoY increase over N7.35 billion declared by the debt office in Q1 2024.

In Q2 2025, the total amount raised by DMO from the FGN Savings bond market stood at N12.65 billion, representing a decline of 12.6 per cent YoY from N14.47 billion in Q2 2024.

So far, the DMO has raised N10.63 billion via the FGN Savings bond in Q3 2025, a drop of 13.4 per cent YoY from N12.27billion in Q3 2024.

The DMO had in 2020 raised a sum of N12.29 billion but the amount raised was truncated by COVID-19 pandemic as the FGN Savings Bond was offered only eight times.

Meanwhile, the latest coupon rate on 2-year and 3-year FGN Savings bond for September 2025 dropped to 15.541 per cent and 16.541 per cent when compared to 17.202 per and 18.202per cent 2-year and 3-year FGN Savings bond for September 2024.

The DMO in its FGN September FGN Savings bond raised N3.05 billion from the allotment, about 15.1 per cent YoY drop when compared to N3.59 billion September 2024.

According to figures published on the DMO’s website, the debt instruments were offered between September 1-5, attracting a total of 2039 successful subscriptions.

Breakdown of the allotment showed that the 2-year bond, due in September 2027, fetched N631.76 million with 792 investors, while the 3-year bond, maturing in September 2028, raked in N2.42 billion from 1,246 investors.

The DMO disclosed that the 2-year bond was allotted at a coupon rate of 15.541per cent, while the 3-year bond cleared at 16.541 per cent.

The N3.3 billion realised from the September 2025 auction was lower than the N3.32 billion raised in August 2025.

THISDAY checks revealed that in 2020, the coupon rate on 2-year and 3-year FGN Savings bond closed December at 1.320 per cent and 1.820 per cent from 7.144 per cent and 8.144per cent the DMO offered in January 2020.

Appetite for FGN bonds is fuelled by Pension Funds Administrators (PFAs), and Nigerian investors who prefer investment instruments with less volatility that assures them of capital returns albeit with low yield on investment.

Responding to THISDAY enquiry on the matter, Vice President, Highcap Securities Limited, Mr. David Andori stated that FGN Savings bond by are oversubscribed because of liquidity surplus in the financial system, stressing that institutional investors continue to look for new avenues to invest funds from maturing securities, coupons and dividend receipts.

According to him, “This is in addition to the fact that FG bonds are essentially risk-free. Notably, Nigerian pension funds are willing takers of FGN debt. Nigerian pension funds have historically favoured government debt as an asset class due to the paucity of good quality investible securities available to them. Other related reasons include the relative lack of depth of the equities market, portfolio safety considerations, and strict investment guidelines by the industry regulator.”

Experts stated that lower bond yields typically indicate that investors perceive reduced risks and are willing to accept lower returns in exchange for safety.

Also, the modest   participation in seven months of 2025 auction suggests that large institutional investors, such as pension funds and asset managers, had excess liquidity to deploy, further compressing yields.

Meanwhile, analysts stated that demand for FGN bonds remains strong, as it offers investors high returns on investments, stressing that the oversubscriptions also revealed that investors have confidence in the federal government’s ability to meet its debt obligations.

Analysts at Coronation in a report titled, “2025 Year Ahead,” said, “As we have seen, there was considerable pain in the bond market during the period from 2020 onwards, including 2024.

“Taking the Bloomberg Nigerian Local Currency Sovereign Absolute Return Index, which is based on a selection of medium and long-dated FGN bonds, recent returns have been poor. The index has returned just 10.8per cent in Naira over the past two years and a meagre 1.4per cent, mark-to[1]market, in 2024.

“2025 could see a reversal in fortunes, in our opinion. If, as we expect, the monetary authorities succeed in bringing inflation under control as the year progresses, with the chances of this increasing in Q4 2025 in our view, then there will be scope for the MPR to be cut and T-bill rates to fall.

“If this happens then we would see a rally in the FGN bond market. While bond rates were going up in 2024 it made sense to cut exposure to long durations and to increase exposure to short durations.

“The reverse would be true if market interest rates start to fall in 2025 and risk-tolerant investors would buy long-dated FGN bonds. Bond rallies are often associated with currency appreciation. If our optimistic scenario with regard to the Naira/US dollar exchange rate is realised, then this could itself point to a bond market rally.

“But, even if there is no actual Naira/US dollar appreciation in 2025, which is what our base case sets out, we believe that there would still be potential for a bond market rally if inflation is brought under control and the CBN is able to cut rates.”

According to the DMO guidelines, retail investors looking to invest in the FGN Saving Bond only need a minimum of N5,000 to invest. Subsequent investment over N5,000 will be in multiples of N1,000. Meaning that investors cannot invest N5,500 or N12,700. It’s either N6,000 or N13,000 or N30,000. The maximum amount a single retail investor can invest in the FGN Saving Bond is N50 million.

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