Cover Story

How Abuja Plans to Borrow ₦260 Billion in Two Afternoons.

The e-mail landed in bond traders’ inboxes at 8:02 a.m. with the bland subject line: “Re-opening: Aug-2030 & Jun-2032 FGN Bonds.” By 8:05, the phones were already hopping. “Rates are going to the moon,” one dealer shouted over the clatter of the dealing room. Another simply sent a meme of a fisherman hooking a whale captioned: “DMO bait, who go bite?”

The Auction Sheet Nobody Asked For

Today’s offer is technically a “re-opening,” meaning Abuja is topping up two existing bonds instead of printing fresh paper.

Target: ₦130 billion apiece off the 10-year (Aug-2030) and 12-year (Jun-2032) tenors.

Settlement date: Thursday, if the bids line up.

If they don’t, the Debt Management Office (DMO) can simply ignore the target and take whatever the market coughs up—an unwritten clause traders call “subject to availability of cheap money.”

But cheap is relative.

Last week’s inflation print—26.8 %, the highest since September 2005—has turned the fixed-income playground into a war zone.

A pension fund manager summed it up while stabbing a cigarette into an ashtray:

“Real yield is negative 10 %. You’re basically paying the FGN to hold your money. Yet if you sit in naira cash, inflation eats you faster. Pick your poison.”

<{h5>Inside the Auction Room: Bids, Tears & Excel Sheets

On the third floor of the Central Bank of Nigeria (CBN) tower, 28 primary dealers (they call themselves “PDMMs”) will spend the next 48 hours guessing how high the government is willing to pay.

The ritual is always the same:

1. Tuesday 9 a.m.—DMO releases the circular.
2. Tuesday 11 a.m.–Wednesday 2 p.m.—banks bid; yield whispers start at +25 basis points above the last close.
3. Wednesday 3 p.m.—bids are sealed; no retraction allowed.
4. Thursday 11 a.m.—results drop; losers curse, winners immediately start off-loading to secondary clients at a markup.

A treasury dealer at a Tier-1 bank slid his spreadsheet across the table. Look,” he says, pointing to a column titled “Breakeven.” “We need 19.50 % on the 2032 just to match inflation. My guess? DMO will clear 18.90 % and spin it as fiscal prudence.”

Where the ₦260 Billion Will Go—Hint: Not Roads

Officially, the borrowing is “to finance budget deficit and refinance maturing obligations.”

Translation: Abuja needs fresh cash to pay off ₦390 billion of promissory notes that mature next month, plus keep the lights on in ministries that have already burned through Q2 allocations.

A source at the Budget Office whispers the real kicker:

“FAAC (monthly revenue sharing) came in ₦107 billion short last month. Without this bond, states won’t get their July allocation before Sallah. You want to tell governors ‘no money’ during election season? Good luck.”

In other words, the auction is a fiscal overdraft dressed up in sovereign gilt.

Foreigners Are Ghosting, Locals Are Trapped.

Offshore holdings of FGN bonds peaked at $18.6 billion in 2018.

Today they languish below $4 billion after three currency devaluations and a 40 % haircut on naira conversion.

“International investors won’t touch Nigeria with a ten-foot pole,” says an analyst at a London hedge fund.

“They’d rather buy Angolan 10-year at 11 % and get kwanza exposure. At least Luanda is pumping 1.1 mbpd.”

That leaves domestic pension funds, insurance companies and banks swimming in liquidity but starved of options.

Total pension assets: ₦17.6 trillion. Statutory requirement to hold 65 % in government securities: non-negotiable.

So they come, grim-faced, to the weekly auction like cows to an abattoir.

The Yield Spiral Nobody Talks About

Here’s the hidden math:

Every extra 1 % the government pays on today’s bond adds ₦2.6 billion to annual interest expense.

Multiply by the ₦77 trillion national debt stack and you get a feedback loop—higher coupons mean wider deficit, wider deficit begets more borrowing, more borrowing pushes yields higher still.

A former DMO director, now lecturing at the University of Ibadan, calls it “the python that eats its own tail.”

“Soon,” he warns, “debt service will gulp 100 % of retained revenue. When that line is crossed, we’re officially in a Ponzi scheme.”

Thursday Morning: The After-Party

Whatever rate clears, the secondary market will react within seconds. If the 2032 stops at 18.75 %, traders will rally, shouting “DMO is dovish!” If it prints 19.20 %, bond prices will crater and equities—already down 8 % YTD—will catch the falling knife.

Either way, by 11:30 a.m. the DMO will issue a press release praising “robust investor appetite” and “prudent liability management.” The minister may even grant a TV interview wearing a victorious smile, promising that “Nigeria remains committed to sustainable debt dynamics.”

Meanwhile, back in the real economy, a baker in Ijebu-Ode will raise bread prices again—blaming “high government borrowing rate that banks now call benchmark.”

A young graduate will open another rejection email; HR departments cite “rising cost of capital.” And the cycle spins.

This has been The Red Hot Report from Pepper-Room. The news that bears it all.