Debt Management Office Targets ₦800bn in February Bond Auction Amid Rising Financing Costs

Federal Government Plans ₦800 Billion February Bond Issuance

The Federal Government of Nigeria plans to raise ₦800 billion through a February 2026 bond auction as part of its domestic borrowing programme. The issuance, announced by the Debt Management Office (DMO), forms part of the government’s strategy to finance fiscal obligations while managing debt maturity profiles.

According to the DMO’s official offer circular, the auction is scheduled for 23 February 2026, with settlement due on 25 February 2026. The offering comprises reopened Federal Government of Nigeria (FGN) bonds across medium and long-term tenors.

Structure of the Bond Offering

The February auction consists of three reopened instruments:

• ₦400 billion of the 17.95 per cent FGN June 2032 bond

• ₦300 billion of the 19.89 per cent FGN May 2033 bond

• ₦100 billion of the 19.00 per cent FGN February 2034 bond

These bonds are issued at a unit price of ₦1,000, subject to standard minimum subscription requirements applicable to primary market participants.

By concentrating on seven and ten-year maturities, the DMO continues its strategy of extending the average maturity of Nigeria’s domestic debt portfolio. Lengthening tenors reduces short-term refinancing pressure and provides greater predictability in debt servicing.

Year-on-Year Increase in Planned Borrowing

The ₦800 billion target represents a significant increase compared with the corresponding February auction in 2025, when the DMO offered ₦350 billion. The planned issuance marks a year-on-year rise of approximately 128.6 per cent, reflecting higher funding requirements and adjustments to fiscal strategy.

However, the February offer is slightly below the ₦900 billion raised in January 2026, indicating a moderated but still substantial borrowing pace at the start of the fiscal year.

Yield Environment and Investor Demand

The coupon rates attached to the bonds ranging between 17.95 per cent and 19.89 per cent reflect the elevated yield environment in Nigeria’s fixed-income market. High yields have sustained strong demand from institutional investors, including pension funds, asset managers and insurance firms seeking secure, income-generating instruments.

FGN bonds remain attractive because they are backed by the sovereign and are exempt from certain taxes under Nigerian law. This enhances their comparative return profile relative to some corporate debt instruments.

At the same time, elevated borrowing costs increase the government’s debt service obligations. According to recent fiscal reports from the Budget Office of the Federation, debt servicing continues to account for a significant share of federally retained revenue, underscoring the importance of careful debt management and revenue mobilisation reforms.

Fiscal and Macroeconomic Context

Nigeria’s domestic borrowing strategy operates within a broader macroeconomic environment characterised by tight monetary conditions and ongoing fiscal consolidation efforts. The Central Bank of Nigeria has maintained a restrictive stance to curb inflationary pressures, which influences market yields across government securities.

Domestic bond issuance provides the government with a relatively stable funding channel compared to external markets, where exchange rate volatility and global interest rate trends can increase financing risk. By relying more heavily on the domestic capital market, authorities aim to mitigate foreign currency exposure while deepening Nigeria’s financial markets.

Implications for Investors and Policymakers

For investors, the February auction presents an opportunity to secure long-dated sovereign instruments at high nominal yields. For policymakers, the auction outcome will serve as a key indicator of market confidence, liquidity conditions and appetite for government securities.

Sustained demand would signal resilience in Nigeria’s fixed-income market despite macroeconomic headwinds. Conversely, weak subscription levels could pressure yields upward and raise borrowing costs further.

The Federal Government’s plan to raise ₦800 billion in February 2026 underscores its continued reliance on domestic debt markets to meet fiscal obligations. By focusing on longer maturities, the DMO aims to manage refinancing risks while maintaining access to capital.

Auction results will offer important signals for Nigeria’s public finance trajectory, investor sentiment and the broader stability of the sovereign debt market in the months ahead.