Policy Watch

Nigeria Monetary Policy Statement


The Central Bank of Nigeria decided to maintain its key rate at 12%.

Nigeria Monetary Policy Statement


The Central Bank of Nigeria decided to increase its key rate from 11% to 12%.

Egypt Monetary Policy Statement


The monetary policy committee decided to increase its key rate by 150 bps to 10.75%.

Nigeria Monetary Policy Statement


The Central Bank of Nigeria decided to retain its key rate at 11%.

Debt vs GDP / Bonds vs bills

All Data - Nigeria

Year 2012 2013 2014 2015 2016 2017
GDP (billions US$) 460.95 514.96 549.91 - - -
Total Outstanding Amount (Billion US$) 57.20 77.47 - - - -
Bonds 27.03 30.09 - - - -
Bills 30.16 47.38 - - - -
Outstanding Amount/GDP (%) 12.41% 15.04% 0.00% - - -

Country Summary

Nigeria rebased its GDP from 1990 to 2010, resulting in an 89% increase in the estimated size of the economy. As a result, the country now boasts of having the largest economy in Africa with an estimated nominal GDP of USD 510 billion, surpassing South Africa’s USD 352 billion. The exercise also reveals a more diversified economy than previously thought. Nigeria has maintained its impressive growth over the past decade with a record estimated 7.4% growth of real gross domestic product (GDP) in 2013, up from 6.7% in 2012. This growth rate is higher than the West African sub regional level and far higher than the sub-Saharan Africa level. The performance of the economy continues to be underpinned by favourable improvements in the non-oil sector, with real GDP growth of 5.4%, 8.3% and 7.8% in 2011, 2012 and 2013, respectively. Agriculture – particularly crop production – trade and services continue to be the main drivers of non-oil sector growth. The oil sector growth performance was not as impressive with 3.4%, -2.3% and 5.3% estimated growth rates in 2011, 2012 and 2013, correspondingly. Growth of the oil sector was hampered throughout 2013 by supply disruptions arising from oil theft and pipeline vandalism, and by weak investment in upstream activities with no new oil finds.

Going forward, there are prospects of strong economic growth although downside risks remain entrenched. Such prospects are expected to hinge on continued recovery of the global economy, favourable agricultural harvests and a possible boost in energy supply arising from the power-sector reform, as well as on expected positive outcomes from the Agricultural Transformation Agenda. Comprehensive economic and structural reforms are also expected to improve economic growth. Nevertheless, the country’s ongoing GDP rebasing may influence the growth figures, possibly making them lower going forward since the expected result is a larger economy.

Risks to Nigeria’s economic growth are the sluggish recovery of the global economy, security challenges in the northeastern part of the country, continued agitation for resource control in the Niger Delta and possible distraction from the ongoing reforms as a result of the upcoming 2015 general elections. Negative growth of the oil sector may also continue to drag down overall growth until a lasting solution is found to the challenge of oil theft and weak investment in exploration due to the uncertain state of play in the sector as a result of non-passage of the Petroleum Industry Bill.

Nigeria faces an ongoing challenge of making its decade-long sustained growth more inclusive. Poverty and unemployment remain prominent among the major challenges facing the economy. One reason for this is that the benefits of economic growth have not sufficiently trickled down to the poor. The national authorities are not oblivious of this reality. Thus, poverty reduction, mass job creation and protection of the most vulnerable and those in the large informal sector are the focus of current policy dialogue and initiatives. In fact, the 2014 national budget that has just been passed into law by the national assembly focuses mainly on creating more jobs and making growth more inclusive.

Increased integration of the poor into global value chains is essential for poverty reduction. Agriculture, which is largely informal, employs about 70% of the labour force, a large portion of which is poor. Adding value to agriculture tradables will create more jobs through its upstream and downstream integration with other sectors of the economy, increase export revenues, boost income of the poor and reduce poverty incidence.

The banking sector is driven by 24 commercial banks. After an audit of the banking system, in 2009, initiated by the Central Bank, the government has recapitalized 3 banks. There was further recapitalization of several other banks and also a process of mergers and acquisitions in the banking sector. As a result of the 2009 Central Bank’s audit, the banking system returned to profitability in 2010.

Due to the high interest rates charged by commercial banks, the Nigerian Stock Exchange (NSE) offers a desirable financing option to companies. At the end of 2014, the NSE had 189 listed companies with a market capitalization of Naira 16.88 trillion (about $90.68 billion).

The government of Nigeria issues debt instruments with maturities from 2 to 20 years. The government issuances helped to restructure the domestic debt portfolio from short term to medium and long-term instruments.

Bonds are also issued by municipalities to finance infrastructure projects. Corporates also participate in the market for capital acquisition.

A 10-Year Eurobond of $500 million was issued in 2010 by the government of Nigeria. This issuance was two times oversubscribed attracting various financial sector investors.

Nigeria is funding its deficit through its domestic debt market. To ensure the vitality of its domestic market, and keep interest rates at an acceptable level, the government of Nigeria established the Debt Management Office (DMO).

Source: African Economic Outlook

Monetary policy & Public debt

The Central Bank is responsible for monetary policy in Nigeria. To achieve its two main objectives, controlling inflation and supporting economic policy, it was created a Committee on monetary policy. This committee meets every two months. The schedule of meetings of the Monetary Policy Committee is available on the Central Bank website.

"The DMO Act", legislation enacted in 2003, empowers the DMO in collaboration with the central bank and the Treasury Department, to assess the ability of financial markets to subscribe to new issues of Treasury bills, to determine new tools to create, transmit or curb and to respond positively to the objectives of the management of domestic debt.

The DMO is currently following the Medium Term Debt Management Strategy 2012-2015 (MTDS). The MTDS main objectives are to bring the ratio of domestic and external debt stock from 88:12 in 2011 to 60:40. It also aims to decrease of the short-term instruments in favour of long-term instruments to hedge against refinancing and other market risks.

Market Structure

Instruments issued and Market participants

Instruments issued

Treasury Bills (T-Bills): Maturities available are 1, 3, 6, 9 and 12months.

Federal Government Nigeria Bonds (FGN Bonds): Maturities available are 3, 5, 7, 10 and 20 years.

Nigerian Treasury bonds or Sub-National Bonds: This includes bonds issued by the States and the Municipalities.

At end of March 2013, the FGN Bonds represented 58,84% (Naira 3,82 trillion) of the domestic debt stock. The T-bills represented 36,01% (Naira 2,34 trillion) of the domestic debt stock. 

Market participants

The DMO issues bonds on a regular basis in order to establish the reference rates of debt securities.

The DMO uses two auctions methods:

  • The Dutch auction or a single price auction
  • The multiple pricing method

The most common method used by the DMO is the Dutch auction.

The Primary Dealers or "Primary Dealer Market Makers" (PDMMs) are the only ones allowed to participate to the auctions. They are acting for their own account or for the count of their clients.

The Asset Management Company of Nigeria (AMCON) was established in 2010 to buy bad debt from banks and save the industry from collapse. Naira 20 billion from the CBN and the Ministry of Finance, FGN Bonds and contributions from the private sector funded AMCON. In 2011, AMCON spent Naira 5,46 trillion to acquire non-performing loans and incurred losses of Naira 2.4 trillion.

AMCON plans to retire a third of its bonds and refinance the rest by 2014. Moody’s Investors Service said that it would boost the country’s credit worthiness. AMCON will issue a Naira 3,6 trillion bond in December to refinance the exposure the non-performing loan’s portfolio, at an interest rate of 6% over a 10-year period. The CBN will invest in this issuance. This issuance will make the CBN, the sole creditor to AMCON by October 2014.

The banks and the discount houses hold 54,77% of the government’s debt instruments, followed by the non-bank institution with 36,69% of the government’s debt instruments. At the end of 2012, the CBN held 6,09% of the total debt portfolio.  A classification of debt by investor type and instruments is available on the DMO’s website.

Primary & Secondary Market

Primary Market

In 2012, FGN Bonds with maturities of 3, 5, 7 and 10 years were offered on the primary market. These issuances were oversubscribed by roughly 2 times the allotted amount. FGN Bonds have been consistently oversubscribed in the last 5 years. New issues of FGN Bonds amounted to almost Naira 1 trillion in 2012 representing an increase of 15% from 2011.

The 10-year bonds represent 55% of the tenor issued in 2012, following by the 7-year bonds with 21,61%, then the 5-year bonds with 21,26% and the 3-year bonds with 2%.

Nigerian residents dominate the FGN Bonds primary market. In 2012, their market share was 89.52% of allotted bonds. Foreign investors’ share increased considerably in 2012 going from less than 1% in 2011 to 10,48% in 2012. This is mainly due to the inclusion of FGN bonds in the J.P Morgan Bond Index and Barclays Bank Bond Index and the attractive yields offered by the market.

Secondary Market

The majority of FGN bonds are listed on the Nigerian Stock Exchange (NSE). However, issuances of less than or equal to 30 billion Naira are traded over the counter. 

In 2012 an active secondary market continued to provide liquidity to investors. The number of transactions on the market was 44,822 and the total face value of transactions was Naira 7,34 trillion. This represents a decline by 18% and 31% respectively as compared to 2011. 

The average price of Bonds increased to Naira 965,97 in 2012 from Naira 892,44 in 2011. This is due to a decrease in the marginal rates at the FGN Bond Auction, which also reflect in the secondary market.

The inclusion of FGN bonds in the J.P Morgan Bond Index and Barclays Bank Bond Index increased the participation of institutional investors in the Nigerian bond market.

Clearing, Settlement and Custody

Clearing and settlement is conducted by a clearing house, the Central Securities Clearing System Limited (CSCS), a subsidiary of the NSE. The CSCS was set up in 1992 to make Nigerian stock market more efficient and investor friendly. CSCS also offers custodian services.

Protection of investors

Investor protection is provided by several agencies.

The Debt Management Office 

The DMO, in addition to its mission to issue Treasury bonds, also ensures the regulation of the bond market and bond market participants.

The Securities and Exchange Commission (SEC)

The SEC is in charged of the development and regulation of the stock market. Decisions taken by the SEC are intended to protect investors and market operators, and ensure the integrity of the market. The SEC conducts:

  • registration of securities and market intermediaries to ensure that only qualified persons or institutions are authorized to operate on the market
  • monitoring of exchanges and trading systems to prevent violations of the rules of the market and to prevent and detect manipulation and unfair trade practices to prevent market disruption
  • investigations into alleged violations of laws and regulations governing the capital market and the enforcement of sanctions
The Nigerian Stock Exchange

All transactions on quoted market are regulated by the Nigerian Stock Exchange. 

Guide to Buying Bonds

Procedures for market participation

A quarterly issuance calendar is available on the website of the DMO. However, the schedule posted may be subject to change.

Bids from bidders whose offers are higher are served first followed by lower bids, until the desired amount is reached. The DMO does not set minimum prices, but may apply a minimum rate in cases where the bid rate does not reflect the operating conditions.

Bids submitted in auctions of FGN Bonds must be expressed for a total amount, at a fixed price and expressed in actuarial rate of return (yield to maturity). Multiple offers are allowed. Tenders must be available for a minimum of 10,000 Naira and multiples of 1000 Naira thereafter. 

The market intermediaries are the only one to quote prices in the secondary market.

Trading system "call over" or "call over trading" has been replaced the Automated Trading System. The prices provided at the NSE correspond to those determined by market intermediaries with the help of a computer network. Bids are received every working day from 11am until execution of those bids.

Settlement cycle

The settlement of the transactions is done by the CSCS through the Nigerian Interbank Settlement System in 2 hours.


In March 2010, the government adopted a law exempting all investors to pay tax on income and gains on financial obligations for all categories. This law is effective for 10 years.


Rating AgencyCurrent ratingOutlook
Fitch BA3Stable
Standard and Poor’sBB-Stable

Primary Dealers

Primary Dealers Market Makers (PDMMs), were introduced in 2006 to allow the emergence of a liquid secondary market and dynamic for government securities. Since then, there has been a strong participation of private investors and foreign investors.

The number of PDMMs has been reduced from 20 to 18 in 2012. These are mainly banks and traders appointed by the DMO. The PDMMs are the only players allowed to participate in the primary market for FGN bonds. They participate in the auctions for their own account and on behalf of their clients. They also allow secondary market liquidity by offering ask and bid prices in all market conditions. In other words, PDMMs must also buy or sell at these prices to respond to investors.

Market Restrictions

Openness to international investors

The Nigerian bond market is open to foreign investors. The Government of Nigeria solicits foreign investment and has implemented various reforms to attract higher levels of investment. These include the loosening of controls on foreign investment. 

Capital Controls

Foreign companies and individuals can hold non-naira-denominated accounts in domestic banks. Account holders have unlimited use of these funds, and foreign investors may repatriate capital without restrictions. 

Restrictions on FX and profit repatriation

The Foreign Exchange Monitoring Decree of 1995 opened Nigeria's foreign exchange market. Investors can carry out unrestricted transfers of dividends abroad, less a 10% withholding tax. Companies must provide evidence of income earned and taxes paid before externalizing dividends from Nigeria. 

Documents & Resources

Documents - Ministry of Finance

Documents - Central Bank

Documents - Stock Exchange

Documents - Other sources