The Federal Government of Nigeria spent N611.71 billion in March 2025 to service its first-ever domestic US dollar-denominated bond, according to the Debt Management Office (DMO). This single payment constituted 23.44% of the total N2.61 trillion spent on domestic debt servicing in the first quarter of 2025. The bond, introduced in August 2024 under a $2 billion programme, raised over $900 million from local investors and was hailed as a landmark deal, earning recognition as “West Africa Deal of the Year.”
The interest payment of $44.97 million was due on March 6, 2025, and was calculated using an exchange rate of N1,511.80/$. However, while the converted interest should amount to about N67.99 billion, the DMO reported a total figure of N611.71 billion, suggesting that a significant portion—about N543.72 billion—was used to redeem the bond’s principal. This made the bond the single largest item in Nigeria’s domestic debt servicing for March, accounting for 47.05% of that month’s total.
The domestic dollar bond has notably altered the makeup of Nigeria’s debt structure. Initially adding N1.47 trillion to the country’s domestic debt stock by September 2024, its outstanding amount dropped to N1.41 trillion by March 2025. Although the bond attracted positive investor interest and deepened the capital market, it also exposed Nigeria to exchange rate risks due to its dollar denomination, especially as the naira continues to depreciate beyond N1,500/$.
Despite being raised locally, the dollar-denominated nature of the bond increases the repayment burden in naira terms. This feature means the cost of servicing the bond rises with every naira devaluation. In March 2025 alone, its servicing outpaced the interest paid on all other domestic instruments, highlighting the growing financial pressure it imposes on Nigeria’s debt management efforts.
Finance Minister Wale Edun emphasized that the bond’s oversubscription shows investor confidence in the economy and aligns with the government’s strategy to diversify funding sources. With a 9.75% coupon and five-year maturity, the $500 million bond was the first tranche of the $2 billion programme. While it offers tax-free returns and expands financing options, the March repayment figure has raised concerns about the sustainability of such instruments under Nigeria’s volatile currency regime.
Source: Punch