The Federal Government spent a staggering N611.71 billion in March 2025 to service its first-ever U.S. dollar-denominated bond issued within the domestic market — making it the single largest domestic debt service item for the month and highlighting the mounting strain of foreign currency-linked obligations on Nigeria’s debt profile.
This was disclosed in the Debt Management Office’s (DMO) latest domestic debt service report for the first quarter of 2025.
The March servicing cost represented 47.05 per cent of the N1.3 trillion spent on domestic debt servicing for the month and 23.44 per cent of the N2.61 trillion expended over 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 foreign currency-denominated instrument issued within Nigeria’s borders.
It was 180 per cent oversubscribed, reflecting strong investor appetite, and was later listed on the Nigerian Exchange (NGX) and FMDQ Exchange. The issuance earned acclaim, winning the “West Africa Deal of the Year.”
According to the DMO, the interest payment of $44.97 million fell due on March 6 and was converted at the official exchange rate of N1,511.80/$, amounting to approximately N67.99 billion.
However, the reported servicing cost was N611.71 billion, suggesting that the Federal Government may have repaid part of the bond’s principal — potentially as much as N543.72 billion — alongside interest.
Commenting on the report, Dr. Ngozi Balogun, a debt sustainability analyst at the Nigerian Institute of Economic Policy, warned that the figures illustrate the growing risks of forex-denominated obligations, even when raised locally.
“The naira depreciation means every dollar of obligation multiplies in naira terms. So while the bond brought in much-needed forex without going to global markets, it’s now exerting tremendous pressure on government finances.”
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According to Balogun, the naira’s continued slide — now hovering above N1,500/$ — turns dollar-denominated debt into a volatile and costly burden, eroding the government’s fiscal flexibility.
At inception, the domestic USD bond added N1.47 trillion to Nigeria’s domestic debt stock of N69.22 trillion as of September 2024, accounting for 2.12 per cent of the total.
By March 2025, the outstanding value had dropped to N1.41 trillion, or 1.88 per cent of the revised domestic debt figure of N74.89 trillion — indicating partial redemption.
“The domestic dollar bond was a bold innovation, but one with unintended consequences,” said Kelechi Onuora, a portfolio manager at Afrinvest. “It shifted some of the forex debt risk from external lenders to local investors — but for the government, the repayment risks are the same, because naira revenues are used to repay a dollar obligation.”
The bond’s repayment in March eclipsed the interest paid on all other domestic instruments combined, including FGN bonds, Sukuk, and Treasury Bills.