Nigeria’s domestic debt servicing costs surged by 164 percent year-on-year in the first quarter of 2025, fuelled by a significant rise in interest payments on Treasury Bills and Federal Government bonds, according to figures released by the Debt Management Office (DMO).
The data show that the federal government allocated N2.6 trillion to domestic debt servicing between January and March, representing a 65 percent increase compared to the final quarter of 2024.
FBNQuest Merchant Bank attributed the spike to a recurring seasonal trend, where obligations tend to accumulate heavily in the first quarter due to increased debt issuances during that period. This, they noted, results in a front-loaded repayment schedule.
Treasury Bills contributed substantially to the increase. The value of Nigerian Treasury Bills (NTBs) more than doubled to N961 billion, up from N374 billion in Q4 2024. This shift raised their proportion of total domestic debt servicing to 36.8 percent, up from 23.7 percent in the previous quarter.
Federal Government bond interest payments also climbed sharply, making up 54 percent of the overall debt service burden. In nominal terms, bond-related payments jumped by 47 percent year-on-year to over N1.4 trillion. Regular bonds accounted for N1.3 trillion of that figure.
Additionally, nearly N68 billion was paid in interest on domestic bonds denominated in foreign exchange over the same three-month period.
FBNQuest, in a recent note to clients, pointed to deepening fiscal pressures as a key concern, stating that “the upward trend in domestic debt servicing underscores the persistent fiscal strain faced by the government, largely stemming from continued revenue underperformance.”
With public debt continuing to climb, analysts cautioned that interest payments would likely remain a substantial strain on federal finances.
Nigeria’s total public debt rose by N27.72 trillion over the past year, bringing the figure to N149.39 trillion. This was largely driven by a weakening naira, which inflated the cost of the country’s external obligations.
Prospects for fiscal relief may lie ahead, as four major tax reform bills have now been signed into law, with full implementation expected to begin next year.
According to analysts, the reforms are projected to broaden the national revenue base, potentially raising tax revenue as a share of GDP from the current 10 percent to 18 percent. The changes are also expected to reduce the country’s dependence on borrowing.
Still, FBNQuest cautioned that any improvement in fiscal outlook will take time, “primarily due to the scheduled implementation timeline, which defers the commencement of key measures until 2026.”
