Investors Shun Nigeria’s 5-year Bonds, Undersubscribe by 83% Amid Shift to Longer Tenors
Samuel Mobolaji
Investor appetite for Nigeria’s 5-year Federal Government bonds collapsed sharply in May 2025, with subscription falling to just 16.4 billion naira against a 100 billion naira offer—an 83 per cent undersubscription that signals a significant shift in market sentiment.
This downturn contrasts sharply with sustained demand for the longer 9-year bond, highlighting a growing investor preference for longer-term debt amid economic uncertainty.
Data from the Debt Management Office (DMO) revealed that the May 26 auction for the 19.30% FGN APR 2029 (5-year bond) and the 19.89% FGN MAY 2033 (9-year bond) saw the shorter tenor struggle. The 5-year bond attracted only 19 bids, with just 11 successful, resulting in a mere 4.7 billion naira in allotments—far below April’s 21.1 billion naira allotment despite the reduced offer size this month.
Meanwhile, its marginal yield dropped slightly to 18.98 per cent from 19.00 per cent, but this did little to rekindle investor enthusiasm.
The 5-year bond’s remaining maturity of just under four years may be deterring investors wary of short-term exposure amid policy uncertainty, inflation concerns, and liquidity pressures. In contrast, the 9-year bond continued to draw strong interest, recording subscriptions of nearly 420 billion naira—more than double its 200 billion naira offer. Though allotment decreased to 296 billion naira from April’s 377 billion naira, demand remained robust, with aggressive bids ranging from 15.00 to 21.43 per cent.
This divergence reveals investors’ growing inclination toward longer-dated instruments offering higher fixed yields and perceived protection against inflation risks.
The DMO’s cautious allotment strategy, particularly for the 9-year bond, may reflect a deliberate effort to balance borrowing costs with manageable repayment schedules.
Overall, the auction results underscore a clear market shift: Nigerian investors are increasingly favouring longer-term government debt while shying away from shorter tenors, reshaping the country’s debt financing landscape amid ongoing economic uncertainties.
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