The Federal Government of Nigeria spent a staggering ₦611.71 billion in March 2025 to service its first-ever domestically issued US dollar-denominated bond, marking a historic fiscal milestone and spotlighting mounting concerns about the rising cost of foreign currency-linked debt.
According to the Debt Management Office (DMO), the payout—comprising both interest and principal—represented 23.44% of the total ₦2.61 trillion in domestic debt service for the first quarter of 2025. Even more significantly, it made up 47.05% of the ₦1.3 trillion spent on domestic debt servicing in March alone, making it the single largest monthly debt service obligation for the period.
The dollar bond, launched in August 2024 as part of a $2 billion Domestic FGN US Dollar Bond Programme, raised over $900 million from local investors and was oversubscribed by 180%. Listed on the Nigerian Exchange and FMDQ Exchange, the bond was later named “West Africa Deal of the Year” for its pioneering approach to domestic foreign currency funding.
In its Q1 2025 debt service report, the DMO noted that the bond’s $44.97 million interest payment fell due on March 6, converted at an exchange rate of ₦1,511.80/$—translating to ₦67.99 billion. However, the DMO reported a total bond servicing figure of ₦611.71 billion, indicating that an estimated ₦543.72 billion in principal repayment was also made that month.
Analysts say the discrepancy highlights the substantial impact of exchange rate volatility on Nigeria’s fiscal obligations. Though the bond was issued domestically, its dollar-denomination exposes it to foreign exchange risk. With the naira currently trading above ₦1,500/$, even locally raised foreign currency debt now imposes a heavy repayment burden in naira terms.
“The servicing of this bond alone outstripped interest payments on most other domestic instruments in March,” one analyst said. “It demonstrates both the success and the potential fiscal hazards of such a funding strategy under a depreciating currency environment.”
Initially valued at ₦1.47 trillion as of September 2024, the bond accounted for 2.12% of the domestic debt stock of ₦69.22 trillion. By March 31, 2025, its outstanding balance had declined to ₦1.41 trillion, or 1.88% of the revised domestic debt total of ₦74.89 trillion.
Finance Minister and Coordinating Minister of the Economy, Wale Edun, hailed the bond’s oversubscription as a strong vote of confidence in Nigeria’s economic outlook. “The issuance of this inaugural domestic FGN US Dollar Bond highlights the continued faith investors have in Nigeria’s economy,” Edun said. “It also supports our broader strategy to deepen capital markets and diversify funding sources.”
The $500 million bond, the first tranche of the $2 billion programme, carries a 9.75% coupon and a five-year maturity. It was designed to attract dollar-holding Nigerian entities seeking a tax-free, risk-mitigated investment, while enabling the government to source FX without accessing volatile international debt markets.
However, with Nigeria’s exchange rate regime under strain, economists caution that similar instruments—though beneficial in deepening the capital market—could further complicate debt sustainability if not carefully managed.
As the government grapples with balancing economic expansion with fiscal prudence, the March 2025 servicing of the domestic dollar bond serves as both a landmark achievement and a stark reminder of the challenges ahead
