EXCLUSIVE: Nigeria’s Borrowing Shift Eases Pressure On Debt Market

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Nigeria’s fixed-income market is entering a new phase of calm as the Federal Government eases its once-aggressive reliance on domestic borrowing, a shift that is reshaping yield dynamics across Treasury bills, bonds, and OMO instruments.

Latest data from the FMDQ Securities Exchange put the total size of the debt market at ₦89.21 trillion as of September 15, underscoring its scale even as appetite for sovereign issuance cools.

Analysts say the moderation reflects Abuja’s recalibrated borrowing strategy, buoyed by stronger foreign reserves, steadier oil prices, and a renewed tilt toward external financing.

“The government’s demand is going down, and that is creating a glut of supply which drives yields lower,” observed capital market analyst Aruna Kebira. He explained that auction outcomes are increasingly dictated by the volumes on offer.

“If the government is selling ₦500 billion, the closing rate will be higher than if it were N100 billion,” he noted, emphasizing how supply mechanics influence pricing.

The market reaction has been swift. On Tuesday, the secondary bond market turned bullish, with average yields slipping two basis points to 16.5 per cent.

Demand was strongest at the short end, where the January 2026 paper shed a hefty 44 basis points. Treasury bills followed a similar trajectory, with average yields across the curve retreating by 30bps to 18.5 per cent.

The softening was most pronounced in the 128- day and 352-day maturities, down 61bps and 74bps, respectively. OMO bills were not spared, as yields contracted sharply by 317bps to 22.3 per cent. Even in the money market, liquidity conditions appeared comfortable.

The overnight rate inched down 4bps to 26.92 per cent, while the Open Repo rate held flat at 26.50 per cent, despite the absence of significant inflows.

By contrast, sovereign bonds were relatively subdued, suggesting a fragile equilibrium between buyers and sellers. Most benchmark maturities from 2029 to 2053 closed flat, with only marginal movements at the 2027 and 2028 tenors.

Futures contracts, however, hinted at cautious optimism: the 10-year September delivery settled at 111.64, while the 6-month and 12-month contracts closed firmer at 115.98 and 113.83. The latest performance underscores the delicate balancing act shaping Nigeria’s debt landscape.

Treasury bills are easing under the weight of liquidity, OMO instruments are correcting more aggressively, and bonds remain largely steady, reflecting an investor community cautiously adjusting to a government that, for the first time in years, is borrowing less at home.

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