In March, FG paid N611.71 billion to service its first domestic dollar bond.
The Federal Government’s first-ever domestically issued bond denominated in US dollars cost N611.71 billion to service in March 2025, making it the highest domestic debt service item for the month and underscoring the growing burden of FX-linked obligations in Nigeria’s debt profile. The most recent report on actual domestic debt service for Q1 2025 from the Debt Management Office (DMO) revealed this.
According to the report, the March payment represented 23.44% of the N2.61 trillion paid in the first quarter overall and 47.05% of the N1.3 trillion spent on domestic debt servicing in that month. Introduced in August 2024 as part of the $2 billion Domestic FGN USD Bond Program, the dollar bond became the first of its kind to be issued in foreign currency in Nigeria after raising over $900 million from domestic investors.
Following a 180% oversubscription, it was listed on the FMDQ Exchange and the Nigerian Exchange (NGX). Additionally, the deal received the “West Africa Deal of the Year” award.
The interest payment of $44.97 million, which was translated at the official currency rate of N1,511.80/$, or around N67.99 billion, was due on March 6, according to the DMO. However, in March, the DMO claimed that the bond’s debt service costs came to a total of N611.71 billion.
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.
Now the question is
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