Fresh Loans Push FG’s Domestic Debt to N77trn

The Federal Government’s domestic debt rose by N7.40tn within nine months, driven largely by fresh issuances of FGN bonds and higher Treasury Bills, data obtained from the Debt Management Office has shown.

Figures from the DMO indicate that the Federal Government’s total domestic debt stock increased from N70.41tn as of December 31, 2024, to N77.81tn as of September 30, 2025, representing a rise of N7.40tn or about 10.52 per cent within the period.

An analysis of the breakdown by instrument shows that FGN Bonds remained the dominant component of the Federal Government’s domestic debt portfolio. As of December 31, 2024, total FGN Bonds stood at N55.44tn, accounting for 78.73 per cent of total domestic debt.

By September 30, 2025, FGN Bonds had increased to N61.99tn, representing 79.67 per cent of the total stock. This reflects an increase of N6.56tn in bond issuances within nine months.

The bond portfolio comprises both Naira-denominated bonds and domestic FGN US Dollar bonds. As of September 2025, Naira bonds accounted for N60.64tn, while domestic US Dollar bonds stood at N1.35tn. In December 2024, Naira bonds were N54.03tn, while domestic US Dollar bonds amounted to N1.41tn.

The data indicate that while Naira bond issuance expanded significantly during the period, the Naira value of the domestic US Dollar bond component declined slightly, reflecting exchange rate conversion adjustments and portfolio movements.

Nigerian Treasury Bills remained the second-largest component of domestic debt. Treasury Bills rose from N12.35tn in December 2024 to N12.68tn in September 2025, representing an increase of N332.39bn. However, their share of total domestic debt declined from 17.54 per cent to 16.30 per cent, indicating that bond issuances grew at a faster pace than short-term instruments.

FGN Sukuk also recorded an increase. Sukuk rose from N992.56bn as of December 2024 to N1.29tn by September 2025, representing a rise of about N300bn. The instrument’s share increased from 1.41 per cent to 1.66 per cent of total domestic debt.

FGN Savings Bonds rose modestly from N72.87bn to N97.46bn within the period, reflecting an increase of N24.60bn. Their share of the total debt stock remained marginal at 0.13 per cent as of September 2025.

Green Bonds recorded a more pronounced increase in relative terms. The stock of Green Bonds rose from N15bn in December 2024 to N62.36bn in September 2025, representing an addition of N47.36bn. Although still a small portion of the portfolio, the growth reflects continued use of thematic financing instruments.

Promissory Notes also increased during the period. The total value of Promissory Notes rose from N1.54tn at the end of 2024 to N1.69tn by September 2025, indicating an increase of N142.95bn.

Within this category, Naira-denominated Promissory Notes increased slightly from N425.65bn to N431.22bn, while foreign currency-denominated Promissory Notes rose from N1.12tn to N1.25tn, reflecting exchange rate conversion adjustments and outstanding obligations.

The DMO noted that the December 2024 figures excluded FGN Bonds in the sum of N680.42bn issued to restructure states’ commercial debt. The December report also included the restructured Ways and Means Advances of N22.719tn through the issuance of FGN Bonds to the Central Bank of Nigeria based on approvals granted in May 2023.

For the September 2025 data, the DMO stated that the domestic US Dollar bond and foreign currency-denominated Promissory Notes were converted to Naira using the applicable official exchange rates as of September 30, 2025.

The increase of N7.40tn within nine months shows the Federal Government’s continued reliance on domestic borrowing to finance fiscal deficits, manage maturing obligations, and fund budgetary requirements.

With total domestic debt now standing at N77.81tn as of September 30, 2025, FGN Bonds remain the dominant financing instrument, accounting for nearly 80 per cent of the total stock.

Economic Confidential also observed that 11 states and the Federal Capital Territory have increased their domestic debt by a combined N373.06bn (or 16.81 per cent) within nine months, even as statutory allocations to states improved during the period.

An analysis of the DMO’s Subnational Domestic Debt Data Reports as of December 31, 2024 and September 30, 2025 revealed that the combined domestic debt stock of Bauchi, Borno, Cross River, Delta, Enugu, Jigawa, Kwara, Lagos, Niger, Rivers and Taraba, alongside the FCT, rose from N2.22tn at the end of 2024 to N2.59tn by September 2025.

The increase occurred within a period marked by stronger revenue flows to states. However, the DMO figures indicate that a group of states expanded their domestic borrowing rather than reducing exposure.

Lagos recorded the highest increase in absolute terms. Its domestic debt rose from N900.19bn as of December 31, 2024, to N1.05tn by September 30, 2025, reflecting an increase of N145.62bn or 16.18 per cent.

Enugu posted the second-largest increase. Its debt stock surged from N119.28bn to N194.72bn within the period, representing a rise of N75.43bn or 63.24 per cent. This marked one of the fastest growth rates among all states. Delta’s domestic debt climbed from N199.58bn to N247.17bn, translating to an increase of N47.60bn or 23.85 per cent.

Cross River also recorded a significant increase, with its debt rising from N118.13bn to N141.94bn, reflecting a growth of N23.81bn or 20.15 per cent. Borno posted the highest percentage increase among the states reviewed. Its domestic debt jumped from N27.91bn in December 2024 to N47.23bn in September 2025, indicating a sharp rise of N19.31bn or 69.19 per cent.

Rivers’ domestic debt rose from N364.39bn to N381.21bn, representing an increase of N16.81bn or 4.61 per cent. Although Rivers remains one of the largest debt holders in nominal terms, its growth rate during the period was relatively modest compared to some others.

The FCT recorded a 24.19 per cent rise in domestic debt. Its debt stock increased from N63.56bn in December 2024 to N78.93bn in September 2025, reflecting an addition of N15.37bn. Bauchi’s domestic debt rose from N143.95bn to N158.20bn, representing a rise of N14.25bn or 9.90 per cent.

Taraba recorded an increase of N8.35bn, with its debt stock moving from N81.39bn to N89.74bn, translating to a 10.26 per cent increase. Kwara’s domestic debt increased moderately from N59.08bn to N62.56bn, reflecting an addition of N3.48bn or 5.89 per cent.

Niger posted a relatively small increase of N2.76bn, as its debt rose from N140.74bn to N143.50bn, representing a 1.96 per cent growth. Jigawa recorded the smallest nominal increase among the group, with its debt rising from N1.33bn to N1.60bn, indicating an addition of N270.77m or 20.37 per cent.

While these 11 states and the FCT increased their borrowing significantly, the overall domestic debt profile of all 36 states and the FCT recorded only a marginal increase during the period.

Total subnational domestic debt rose from N3.97tn as of December 31, 2024, to N4.00tn as of September 30, 2025, reflecting an increase of N34.84bn or 0.88 per cent. This indicates that the N373.06bn expansion in debt by the 11 states and the FCT was partly offset by reductions in domestic debt recorded by 25 other states.

States that reduced their domestic debt within the period included Abia, Adamawa, Akwa Ibom, Anambra, Bayelsa, Benue, Ebonyi, Edo, Ekiti, Gombe, Imo, Kaduna, Kano, Katsina, Kebbi, Kogi, Nasarawa, Ogun, Ondo, Osun, Oyo, Plateau, Sokoto, Yobe, and Zamfara.

For instance, Ogun reduced its domestic debt from N211.86bn to N168.09bn, reflecting a decline of N43.77bn. Edo cut its debt from N113.00bn to N76.13bn, representing a drop of N36.86bn. Imo reduced its exposure from N126.14bn to N90.51bn, a decline of N35.64bn.

Kogi recorded the largest percentage decline among all states, reducing its domestic debt from N41.59bn to N14.31bn, representing a sharp 65.59 per cent reduction.

Abia reduced its domestic debt by N17.58bn, while Bayelsa recorded a drop of N23.99bn. Plateau cut its debt by N27.00bn, and Akwa Ibom reduced its stock by N26.69bn within the same period.

The data show a clear divergence in fiscal strategies across subnational governments. While a majority of states reduced their domestic debt exposure, 11 states and the FCT increased borrowing significantly, driving a concentration of liabilities within a smaller group.

In December 2024, the 11 states and the FCT accounted for 55.94 per cent of total subnational domestic debt. By September 2025, their share had risen to 64.77 per cent, indicating a growing concentration of domestic liabilities.

Lagos alone accounts for more than N1tn of the total N4.00tn domestic debt stock, showing its dominant position within the subnational borrowing landscape. Rivers, Delta, and Enugu also remain among the largest debt holders in nominal terms.

Although the aggregate growth in total domestic debt was less than one per cent, the underlying shifts highlight a significant redistribution of borrowing across states.

The N373.06bn increase recorded by the 11 states and the FCT within nine months suggests that improved allocations did not uniformly translate into lower borrowing across subnational governments, as domestic debt levels rose sharply among a concentrated group of states.

The PUNCH earlier reported that FAAC allocation to states surged by over N2tn in one year, according to an analysis of Federation Account disbursement data published by the National Bureau of Statistics.

The data show that state governments received a total of N7.315tn from the Federation Account Allocation Committee in 2025, compared with N5.186tn in 2024. The year-on-year increase of roughly N2.13tn represents a jump of about 41 per cent in direct FAAC allocations to states.

When the constitutionally mandated 13 per cent derivation revenue is added, total inflows attributable to states climbed to N8.934tn in 2025, up from N6.533tn in 2024, a rise of N2.4tn or 36.74 per cent.

This surge came against the backdrop of a sharp expansion in total FAAC distributions. Aggregate allocations to the three tiers of government, including derivation, rose from N15.259tn in 2024 to N21.897tn in 2025, a 43.5 per cent increase year-on-year.

States therefore captured a substantial share of the overall increase, both in absolute terms and as a proportion of total federation revenues. Without the 13 per cent derivation component, states’ N7.315tn allocation in 2025 accounted for about 33.4 per cent of the N21.897tn total FAAC disbursement for the year.

However, this compares with a share of roughly 34.0 per cent in 2024, when states received N5.186tn out of N15.259tn. The picture changes when derivation revenue is included. Adding the N1.619tn paid out as 13 per cent derivation in 2025 lifts total state-linked receipts to N8.934tn, representing about 40.8 per cent of total FAAC disbursements for the year

In 2024, states plus derivation received N6.533tn, equivalent to around 42.8 per cent of the total. This indicates that while derivation inflows grew significantly in nominal terms, their relative weight in the overall pool edged lower in 2025 as allocations to all tiers expanded.

Despite the surge, the data also reveal that states did not disproportionately outpace the other tiers in terms of growth. Federal Government allocations rose from N4.951tn in 2024 to N7.613tn in 2025, an increase of about N2.66tn or 53.8 per cent.

Local government councils saw their allocations grow from N3.774tn to N5.351tn, an increase of roughly N1.58tn or 41.8 per cent.

A renowned economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, warned that rising Federal Government borrowing from the domestic financial system is increasingly crowding out the private sector, as banks favour low-risk, high-yield government securities over lending to businesses.

According to him, the surge in government borrowing is largely driven by the need to finance widening fiscal deficits, which has translated into increased issuance of Treasury bills, bonds, and other government securities.

Yusuf noted that the prevailing interest rate environment has further tilted banks’ preference towards government instruments.

He said, “The increase in credit to the government can be attributed to a number of factors. The government has been raising money to finance the deficit. So this financing of the deficit has led to the issuance of bonds, treasury bills, and so on, which banks also buy. The rate is also very attractive, and it’s more attractive to them than lending to the real sector,” Yusuf said.

Also, the Director and Chief Economist at Proshare Nigeria LLC, Teslim Shitta-Bey, warned that the rising debt burden on Nigeria’s subnational governments could challenge their fiscal stability in the coming years.

He stressed that most state governments, along with the Federal Government, had failed to effectively manage their balance sheets. Shitta-Bey said, “The challenge here is that most of the governments, including the Federal Government, are unable to manage their balance sheets properly. While borrowing might seem like an easy way to run operations, it is not necessarily the right approach.”

According to Shitta-Bey, borrowing should not be the default solution for governments. “Governments could consider longer-term debt structures that resemble equity, which might actually be more beneficial in the long run,” he explained.

A macroeconomic analyst, Dayo Adenubi, emphasised the need for states to take more targeted steps toward boosting internally generated revenue as they grapple with rising debt obligations.

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, earlier said that Nigeria must reduce its dependence on borrowing and build a stronger, more reliable domestic revenue base to stabilise its finances and fund development sustainably.

Edun warned that the global financial environment had become increasingly hostile to developing economies, making debt-driven financing more costly and less viable. “And of course, we need to reduce our dependence on debt. And so, revenue mobilisation within this context is a developmental imperative,” Edun said.

He linked Nigeria’s rising debt pressures to global shocks, including the COVID-19 pandemic, geopolitical conflicts, and trade tensions, which have forced many developing countries to borrow more while paying higher debt service. These pressures have squeezed fiscal space, making it more difficult for governments to fund essential services and further reinforcing the need for sustainable domestic revenue.

“That is why it is critical at this time that we move to an era of sustainable revenues so that we can invest meaningfully in infrastructure, strengthen education and healthcare, and help the poorest and most vulnerable,” Edun said.