FG Cuts Domestic Debt Service by 38% in January 2026, Signaling Stronger Fiscal Management

The Federal Government (FG) of Nigeria has significantly reduced its domestic debt service payments, spending $405.3 million in January 2026—a 38.5% decline compared to $659.7 million in the same month of 2025. This sharp reduction marks a continued trend of fiscal prudence and cost optimization in debt management, according to recent data from the Central Bank of Nigeria’s (CBN) International Payment report.

The decline in January aligns with a broader reduction in total federal debt service payments for 2025. The government spent $7.22 billion on debt service in 2025, down 2.95% from $7.44 billion in 2024. Analysts attribute this decrease to lower interest obligations across major domestic debt instruments, particularly Federal Government Bonds (FGN Bonds) and Nigerian Treasury Bills (NTBs), which make up the bulk of Nigeria’s domestic debt.

Experts say the fall in debt service payments reflects both a slowdown in new paper issuance in the primary market and yield compression in Nigeria’s fixed-income market. This indicates that the government is not only borrowing more efficiently but also benefiting from favorable market conditions that reduce the cost of servicing its debt.

The Debt Management Office (DMO) played a key role in this strategy, raising N5.26 trillion through the FGN bond market in 2025 to fund the federal budget deficit, while total investor subscriptions reached N8.96 trillion. In January 2026 alone, the DMO oversubscribed its initial N900 billion target, raising N1.54 trillion from the sale of three FGN bonds, demonstrating strong investor confidence in government securities.

Despite the reduced debt service payments, Nigeria’s domestic debt stock continued to grow, reaching N77.81 trillion as of September 30, 2025. This increase was driven largely by expanded FGN bond issuances, highlighting a delicate balance between managing rising debt levels and keeping debt service costs under control. The government’s approach signals a careful fiscal strategy aimed at sustaining economic stability while servicing its obligations efficiently.

source: vanguard