FGN bonds, Commercial Papers, see oversubscription
The Nigerian fixed-income market is witnessing massive oversubscriptions in both Federal Government Bonds and Commercial Papers, as institutional and retail investors scramble to lock in high-interest yields before the Central Bank of Nigeria (CBN) kicks off its widely anticipated rate-cutting cycle tomorrow.
On the eve of the Monetary Policy Committee (MPC) meeting, N2.699 trillion in subscriptions poured into FGN bonds, nearly four times the N800 billion offer, while high-grade corporate CPs from giants like Mecure are being mobbed by investors desperate to lock in double-digit yields before a projected rate cut.
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“Over subscription is killing allotment for these CPs, everyone is trying to lock-in on over 20 percent yield before rate cut,” Oise Ajayi, portfolio manager at Tangerine Life. “If the MPC cuts tomorrow, the next series of these papers will likely re-price downward immediately. No one wants to be left holding cash when yields are tumbling.”
Market data tracked by BusinessDay shows that recent CP issuances from top-tier firms in the manufacturing and financial services sectors have seen oversubscription levels ranging from 150 to 280 percent. Investors are aggressively front-running the Monetary Policy Committee (MPC) meeting, where a consensus of analysts expects a benchmark rate cut of at least 100 to 200 basis points, citing slowing inflation, stable exchange rates, and improving economic indicators, according to a poll by BusinessDay.
Read also: Disinflation trend puts major rate cut on table at MPC
MeCure Industries Plc was in the market for a N40 billion Commercial Paper Programme at a yield of 21.75 percent. Coleman Technical Industries Limited also issued N50 billion at 20.50 percent.
“MECURE closed 2 days earlier, and Coleman was open for only about 2 days.
Everyone knows what’s coming,” Ajayi said.
With headline inflation cooling to 15.1 percent in January 2026, the era of the 27 percent Monetary Policy Rate (MPR) appears to be reaching its sunset.
“Also, the rush for Commercial Papers is also because of the decline in yields on the one-year treasury bills, and the former offers higher returns. No one wants to be left holding cash when yields are tumbling, ” a Lagos-based investment banker said.
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Investors are particularly favoring 180-day and 270-day tenors, aiming to protect their portfolios against the reinvestment risk that will come when rates normalize in the second half of 2026.
Data from the latest primary market auction reveals a dramatic shift in investor sentiment. The Debt Management Office (DMO) saw historic bidding across all tenors, particularly in the 10-year FGN FEB 2034 paper, which recorded almost 10 times oversubscription, seeing N972 billion subscription on its N100 billion offer.
The 6-year (JUN 2032) and 9-year (MAY 2033) tenors alone attracted a massive N1.726 trillion in bids, though the DMO allotted only N332.66 billion,
Crucially, stop rates, the interest the government pays, have plummeted. Long-dated bonds that previously cleared near 17.50 percent at the January auction have crashed to 15.50 percent.
For Nigerian corporates, the oversubscription is a double-edged sword. While it signals robust liquidity and investor confidence, it also reflects a desperate search for returns in a market where Treasury Bill yields have already begun to compress, recently touching 18.9 percent for the one-year paper.
“ As a result of the massive demand, the stop rate on the 1-year bill declined significantly to 15.90 percent, indicating aggressive bidding and potential expectations of gradual yield moderation ahead. The sharp oversubscription at the long end signals liquidity concentration and duration preference by institutional players. If sustained, this could gradually compress yields across Commercial Papers, fixed deposits, and money market funds, “Ayodeji Ebo, managing director of Optimus by Afrinvest.
Read also: Strong demand drives down yield on 1-yr Treasury Bills to 18.90%
However, should the CBN choose to “hold” rates to further dampen remaining inflationary members, the current oversubscription may look like a premature celebration, leaving investors locked into corporate risk when government risk still pays nearly the same.
