The Debt Management Office (DMO) has signaled its intention to ramp up domestic debt mobilization, announcing a massive ₦800 billion Federal Government of Nigeria (FGN) bond auction for February 2026.
This latest offer represents a significant 128.6% increase over the ₦350 billion raised in the same period in 2025, underscoring the government’s continued reliance on the local debt market to fund budget deficits and infrastructure projects amidst a high-interest-rate environment.
The Auction Breakdown: High Yields for Long-Term Plays
The February 2026 offer is split across three tenors, designed to appeal to institutional investors seeking to lock in yields as inflation begins to show signs of moderation.
- 7-Year Re-opening: ₦400 billion at 17.95% (Maturing June 2032).
- 10-Year Re-opening: ₦300 billion at 19.89% (Maturing May 2033).
- 10-Year Re-opening: ₦100 billion at 19% (Maturing February 2034).
Key Dates: The auction is set for February 23, 2026, with settlement following on February 25, 2026. Investors can participate with a minimum subscription of ₦50,001,000, positioned largely for Pension Fund Administrators (PFAs), insurance companies, and high-net-worth individuals.
Investor Appetite: The Search for Alpha
FGN bonds continue to be the darling of the Nigerian capital market. Data from the NBS for Q3 2025 previously highlighted that bonds were a major driver of the $4.85 billion Portfolio Investment inflows, as foreign investors remain attracted to Nigeria’s elevated yields.
Despite the ₦800 billion target being slightly lower than January 2026’s ₦900 billion float, analysts expect strong oversubscription.
The tax-exempt status of these instruments under the Company Income Tax Act (CITA) and Personal Income Tax Act (PITA) makes them particularly attractive for pension funds looking for risk-free, tax-efficient returns.
The Deficit Financing Tightrope
The aggressive scale-up in bond issuance, more than doubling last year’s February volumes, reflects the fiscal pressure on the Federal Government to finance its 2026 budget.
While these instruments are liquid assets for banks and backed by the “full faith and credit” of the nation, the rising cost of debt servicing remains a metric to watch.
With the 10-year paper touching nearly 20%, the government is paying a premium to attract domestic capital.
For the broader economy, this high-yield environment acts as a double-edged sword: it attracts Foreign Portfolio Investment (FPI) and mops up excess liquidity to curb inflation, but it also keeps the cost of borrowing high for the private sector.
As the DMO heads to the market on February 23, the focus will be on the stop rate. If the auction clears at significantly higher yields, it will further signal the Central Bank’s commitment to a hawkish monetary stance.
For investors, it remains a prime window to secure long-term, inflation-hedging returns in a volatile macro-climate.
