The Federal Government spent a staggering N611.71 billion in March 2025 to service its first-ever US dollar-denominated bond issued within Nigeria, making it the largest single domestic debt service item for the month and spotlighting the growing strain of FX-linked obligations on the country’s finances.

This was revealed in the Debt Management Office (DMO)’s latest report on actual domestic debt servicing for the first quarter of 2025.

According to the report, the March payout on this dollar bond accounted for 47% of the N1.3 trillion spent on domestic debt servicing that month, and nearly a quarter (23%) of the total N2.61 trillion spent in the entire first quarter.

The bond itself, launched in August 2024 under the $2 billion Domestic FGN USD Bond Programme, raised over $900 million from local investors—marking Nigeria’s first foreign currency bond issued within its own borders. The instrument was 180% oversubscribed, later listed on the NGX and FMDQ exchanges, and even won “West Africa Deal of the Year.”

In March, an interest payment of $44.97 million fell due. Converted at the official rate of N1,511.80/$, this amounts to roughly N68 billion. However, the DMO reported total servicing costs for the bond of N611.71 billion in March, indicating that alongside interest, a substantial portion of the principal—estimated at about N544 billion—was also redeemed.

A rising burden tied to the naira’s fortunes

As of September 2024, this dollar bond added N1.47 trillion to Nigeria’s domestic debt stock. By March 2025, the outstanding had dropped to N1.41 trillion, accounting for 1.88% of total domestic debt now revised to N74.89 trillion.

Although hailed for deepening Nigeria’s capital markets and offering local dollar holders a tax-free investment, the bond also exposes the government to significant exchange rate risks. Despite being raised domestically, its repayments are tied to the US dollar. Thus, each bout of naira depreciation inflates the government’s debt service obligations.

This risk is already playing out with the naira trading above N1,500/$—meaning even without fresh external borrowing, such instruments are driving up Nigeria’s debt servicing costs in local currency terms.

In March, servicing this single dollar bond eclipsed interest payments on virtually all other domestic debt instruments combined.

Originally designed to help the government raise foreign exchange from local sources and reduce reliance on volatile Eurobond markets, the bond’s servicing costs now highlight the vulnerability of Nigeria’s fiscal position to exchange rate swings. It also draws renewed scrutiny to the country’s expanding portfolio of FX-denominated debt—even when sourced internally—amid persistent currency instability and rising external obligations.