FG Spends N611.7bn on Dollar Bond Service in March – DMO
The Federal Government spent N611.71bn in March 2025 to service its first-ever domestic US Dollar-denominated bond, marking a significant fiscal milestone and raising concerns about the growing weight of foreign currency-linked obligations in Nigeria’s public debt profile.
According to the latest data from the Debt Management Office, this single repayment accounted for 23.44 per cent of the N2.61tn total domestic debt service obligations recorded in the first quarter of 2025.
The bond, introduced in August 2024 under the $2bn Domestic FGN US Dollar Bond Programme, raised over $900m from local investors and was the first of its kind to be issued domestically in foreign currency.
The debut issuance was 180 per cent oversubscribed and has since been listed on the Nigerian Exchange and the FMDQ Exchange. It was later recognised as the “West Africa Deal of the Year.”
According to the DMO’s Q1 2025 report on actual domestic debt service, the bond’s interest payment of $44.97m was due on March 6 and converted at an exchange rate of N1,511.80/$.
It was observed that while the $44.97m at that exchange rate would lead to an interest of N67.99bn, the DMO stated the interest rate to be N611.71bn.
With the interest rate overstated by the DMO, it may mean that the Federal Government redeemed N543.72bn in principal on the same bond in March, bringing the total to N611.71bn for the month.
This figure alone accounted for 47.05 per cent of the N1.3tn spent on domestic debt service in March, making it the largest single line item in that month’s obligations.
The introduction of the dollar bond significantly altered the structure of Nigeria’s domestic debt profile. As of September 30, 2024, the bond added N1.47tn to the domestic debt stock of N69.22tn, accounting for 2.12 per cent of the total.
By March 31, 2025, the outstanding amount had declined to N1.41tn, representing 1.88 per cent of the revised total domestic debt of N74.89tn.
While the bond has been praised for deepening Nigeria’s capital markets and providing an alternative to Eurobond issuance, it introduces considerable exchange rate risk.
Although raised locally, the bond is dollar-denominated and therefore imposes a heavier repayment burden in naira terms whenever the local currency depreciates.
With the naira trading above N1,500/$, 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 interests paid on all other domestic instruments in March.
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 shows the financial weight of servicing such debt under an unstable currency regime.
While discussing the results of the bond issuance, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, noted that the oversubscription reflects investor confidence in Nigeria’s economic stability and potential for growth.
Edun explained that the successful issuance of the domestic dollar bond marks a significant step in the government’s efforts to deepen economic growth and promote financial inclusion.
He added that this achievement demonstrates the government’s commitment to diversifying funding sources amid economic challenges.
“The issuance of this inaugural domestic FGN US Dollar Bond highlights the continued faith investors have in Nigeria’s economy,” Edun said.
The $500m domestic FGN US Dollar Bond, with a five-year maturity and a 9.75 per cent coupon, is the first tranche of a $2bn bond programme registered with the Securities and Exchange Commission.
