The Federal Government spent N611.71 billion in March 2025 servicing its first-ever US dollar-denominated bond issued within the domestic market, making it the single largest domestic debt service item for the month and highlighting the rising cost of FX-linked obligations in Nigeria’s debt profile.
This was disclosed in the Debt Management Office (DMO)’s latest report on actual domestic debt service for Q1 2025.
The report shows that the March payment accounted for 47.05% of the total N1.3 trillion spent on domestic debt servicing that month and 23.44% of the N2.61 trillion total spent in the entire first quarter.
The dollar bond, introduced in August 2024 under the $2 billion Domestic FGN USD Bond Programme, raised over $900 million from local investors, becoming the first of its kind to be issued in foreign currency within Nigeria.
It was 180% oversubscribed and later listed on both the Nigerian Exchange (NGX) and FMDQ Exchange. The deal was also awarded the “West Africa Deal of the Year.”
According to the DMO, the interest payment of $44.97 million was due on March 6 and was converted at an official exchange rate of N1,511.80/$, which amounts to approximately N67.99 billion. However, the DMO reported a total of N611.71 billion as debt service cost for the bond in March.
The discrepancy suggests that the government may have redeemed part of the bond’s principal—estimated at N543.72 billion—alongside the interest payment, bringing the total to N611.71 billion. If confirmed, this would mark a significant principal repayment only seven months after the bond’s issuance.
What you should know
As of September 30, 2024, the bond added N1.47 trillion to the domestic debt stock of N69.22 trillion, accounting for 2.12% of the total. By March 31, 2025, the outstanding amount had declined to N1.41 trillion, representing 1.88% of the revised total domestic debt of N74.89 trillion.
- While the bond has been praised for deepening Nigeria’s capital markets and providing an alternative to Eurobond issuance, it introduces considerable exchange rate risk.
Although raised locally, the bond is dollar-denominated and therefore imposes a heavier repayment burden in naira terms whenever the local currency depreciates.
- With the naira trading above N1,500/$, such instruments inflate the government’s debt servicing costs, even in the absence of new external borrowing.
- The dollar bond servicing alone eclipsed most of the interest payments made on all other domestic instruments in March 2025.
The domestic dollar bond was created to offer a safe and tax-free investment avenue to dollar-holding entities in Nigeria while helping the Federal Government raise foreign exchange without tapping volatile international markets.
- However, the March 2025 repayment figure highlights the financial weight of servicing such debt under an unstable currency regime.
The outsized cost of servicing this single instrument has renewed focus on Nigeria’s increasing exposure to FX-denominated liabilities, especially those tied to volatile exchange rates. Although issued domestically, the dollar bond adds pressure to Nigeria’s fiscal balance, given the weakening of the naira and growing external debt service obligations.
