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Debt Alert: FG Pays N611.71bn in March to Settle First Local Dollar Bond!
The Federal Government expended ₦611.71 billion in March 2025 to service its first-ever US dollar-denominated bond issued in the local market — the largest single domestic debt service item for the month — underscoring the escalating burden of foreign exchange-linked liabilities in Nigeria’s debt portfolio.....KINDLY READ THE FULL STORY HERE▶
The Debt Management Office (DMO) has revealed that the Federal Government spent ₦611.71 billion in March 2025 servicing its first-ever US dollar-denominated bond issued within the domestic market. This figure emerged from the DMO’s latest report on actual domestic debt servicing for Q1 2025.
According to the report, the March payment alone accounted for 47.05% of the ₦1.3 trillion spent on domestic debt service that month, and 23.44% of the ₦2.61 trillion expended during the entire first quarter—underscoring the rising burden of foreign exchange-linked obligations.
Introduced in August 2024 under the $2 billion Domestic FGN USD Bond Programme, the instrument raised over $900 million from local investors and was 180% oversubscribed. It marked a historic milestone as Nigeria’s first local-currency-market-issued foreign exchange bond, later listed on both the Nigerian Exchange (NGX) and FMDQ Exchange. The deal was also recognised with the “West Africa Deal of the Year” award.
The DMO reported that $44.97 million in interest was due on March 6, 2025. Converted at the official exchange rate of ₦1,511.80/$, this equals roughly ₦67.99 billion. However, the total servicing cost reported for March was ₦611.71 billion—suggesting the government may have redeemed a portion of the bond’s principal (estimated at ₦543.72 billion) alongside the interest. If so, this would represent an unusually early partial principal repayment, just seven months after issuance.
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As of September 30, 2024, the bond added ₦1.47 trillion to Nigeria’s domestic debt stock of ₦69.22 trillion, accounting for 2.12% of the total.
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By March 31, 2025, the outstanding balance had dropped to ₦1.41 trillion, or 1.88% of the revised total of ₦74.89 trillion.
While hailed for deepening domestic capital markets and offering a tax-free investment avenue for dollar-holding entities, the bond’s dollar denomination poses serious risks. As the naira continues to weaken—now trading above ₦1,500/$—repayment costs in local currency terms have surged, putting further strain on fiscal resources.
Despite not tapping the volatile Eurobond market, Nigeria’s exposure to foreign exchange risk has grown through instruments like the domestic USD bond. The March servicing cost alone dwarfed payments made on all other domestic instruments, raising red flags over sustainability.
Created to attract FX into government coffers and reduce external borrowing, the bond’s substantial cost underlines the challenges of managing dollar-denominated liabilities in a volatile exchange rate environment. As FX-linked debt grows, so does the pressure on Nigeria’s fragile fiscal balance.
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