LAGOS Nov 17 (Reuters) – Nigeria sold far fewer bonds than it offered on Wednesday, as investors demanded higher yields from a government struggling to contain its borrowing costs.

Africa’s largest economy raised 39 billion naira ($128.21 million) in bonds maturing in five, 10 and 20 years time, less than half the 95 billion naira it had wanted.

Investors were demanding yields as high as 18 percent for the notes, way above the mid-point at which the Debt Management Office (DMO) wanted to issue them, auction results showed.

“The thinking in the market was that the bonds are not rightly priced now considering the level at which treasury bills are trading, hence the lack of interest to buy at the present yield level,” one trader told Reuters.

The DMO sold 20 billion naira worth of 2036 debt at 15.94 percent and 14 billion naira of 2026 debt at 15.98 percent.

It issued 5 billion naira of 2021 debt at 15.48 percent, less than 15 percent of the 35 billion naira initially offered.

Nigeria is facing its worst recession in 25 years, brought on by a slump in the price of its main export oil, which has slashed government revenues, hammered its naira currency and created chronic dollar shortages.

($1 = 304.20 naira) (Reporting by Oludare Mayowa; Writing by Chijioke Ohuocha; Editing by Andrew Heavens)