Nigeria cuts savings bond rates to lowest in a year

The federal government has lowered interest rates on its March 2025 savings bond, marking the steepest drop in a year.

The new rates, announced by the Debt Management Office (DMO) on Monday, follow the National Bureau of Statistics’ sharp cut in inflation after rebasing, while the Central Bank of Nigeria (CBN) held the benchmark lending rate for the first time in months.

The savings bond, which allows Nigerians to invest in government securities, is open for subscription from Monday to Friday. The DMO has set the new rates at 16.635% for the two-year bond maturing in 2027 and 17.635% for the three-year bond maturing in 2028, down from 17.799% and 18.799% in February, respectively.

A Pluboard review of savings bond rates over the past year shows fluctuations, but the March 2025 decline is the steepest in 12 months. Previously, the government had maintained elevated rates to attract investors amid high inflation.

However, with the recent rebasing of Nigeria’s Consumer Price Index (CPI)—which lowered the official annual inflation figure by about 10 percentage points—the government is adjusting borrowing costs accordingly.

Despite the CPI rebasing, consumer prices remain high in the open market, raising concerns about the real impact of lower official inflation figures on household spending power.

The CBN has held its benchmark interest rate steady after months of tightening monetary policy to curb inflation. This has influenced borrowing costs, including the rates on savings bonds. The DMO’s latest move suggests that the government expects borrowing costs to trend lower in the coming months, in line with policy adjustments.

For investors, the lower rates mean reduced returns on savings bonds, though the securities remain attractive for those seeking stable, low-risk investments. With inflation still a concern, real returns on these bonds depend on future inflation trends and monetary policy adjustments.