The Debt Management Office (DMO) faced less enthusiasm from investors at its April FGN bond auction, with total bids less than that of the previous month.

While the cost of borrowing on both bond offers has decreased over the past year, the auction saw investors bid a total of N495.95 billion compared to N531 billion in March.

“The decline in demand might be a result of investors taking a wait-and-see approach to see if policy rates will adjust upwards as inflation printed upwards in March, which might give room to invest at higher yields other than locking in now,” Tunde Abidoye, analyst at FBNQuest Merchant Bank, said.

Nigeria’s inflation trajectory reversed in March, rising to 24.2 percent from 23.2 percent in February. The March print introduces new uncertainty into the disinflation narrative and may lower the odds of a rate cut at the May 2025 MPC meeting.

The market was liquid, 1.63 trillion on Monday, the day of the auction. The rates on the five-year (Apr 29s) have dropped 30 basis points compared to borrowing costs one year ago. This drop is from 19.30 percent when it was first issued in April 2024.

The rates on the federal government bonds have consistently declined steadily since February, after inflation dropped to 24.4 percent when its methodology was changed.

However at this auction rates remained the same as it was in March. Total demand at the auction on Monday was higher than the previous month, with bids amounting to N495.95 billion, compared with N530 billion in March.

The auction includes two offerings: a N200 billion re-opened five-year savings bond, maturing in April 2029, and a N100 billion re-opened nine-year savings bond, maturing in May 2033.

The DMO sold a total of N397.89 billion across both offers. On the five-year bond, the DMO sold N21.12 billion at a yield of 19.0 percent, same as the last auction.

The nine-year bond got the most investors’ attention, seeing more than double its offer, however, only N376.77 billion was sold at a yield of 19.99 percent.

Total FGN Bond sales year-to-date hit N2.44 trillion. FGN bond sales in Q1 have trailed 2024 levels, despite a larger budget deficit in 2025.

In second quarter of 2025 will likely serve as a catch-up period, with the DMO expected to maintain its usual 5-year, 7-year, and possibly 10-year bond offerings. (BusinessDay)