Nigeria incurred N140.29 billion in interest payments on its domestic US dollar-denominated bonds between January and September 2025, according to the latest Actual Domestic Debt Service report published by the Debt Management Office (DMO).
The figure reflects two semi-annual coupon payments: N67.99 billion disbursed in March 2025 and N72.31 billion settled in September 2025. These obligations stem from outstanding domestic FGN US Dollar bonds issued in prior years to diversify funding sources and attract local institutional investors seeking dollar-linked instruments.
While the dollar bond interest represents only a fraction of the broader domestic debt servicing burden, it highlights the growing cost of foreign-currency-linked liabilities amid persistent naira depreciation and elevated global interest rates.
For context, total interest paid across all domestic debt instruments during the same nine-month period amounted to N6.06 trillion. When principal repayments are included, overall domestic debt service reached N6.32 trillion.
A breakdown of the interest component shows:
– Federal Government of Nigeria (FGN) Bonds: N4.17 trillion (the largest share, driven by long-dated Naira-denominated issuances)
– Nigerian Treasury Bills: N1.81 trillion
– FGN Sukuk: N70.72 billion
– FGN Savings Bonds: N9.60 billion
– Green Bonds: N1.08 billion
The domestic US dollar bond component, though smaller in absolute terms, carries particular significance because coupon payments are fixed in foreign currency terms and converted to naira at prevailing official exchange rates on payment dates. This exposes the federal government to exchange rate risk, amplifying the naira cost when the currency weakens.
The figures come amid ongoing fiscal consolidation efforts and increased scrutiny of debt servicing costs relative to revenue performance. Analysts note that rising interest obligations—particularly on dollar-linked paper—could constrain fiscal space for capital spending and social programmes if not matched by commensurate revenue growth or debt restructuring.
The DMO has continued to rely on a mix of short- and long-term instruments to manage funding needs, with domestic dollar bonds forming part of a strategy to broaden the investor base and reduce exclusive dependence on naira-denominated debt. However, the exchange rate sensitivity of these instruments remains a key vulnerability in the current macroeconomic environment.
Market observers will monitor upcoming debt service trends, especially as the government prepares the 2026 fiscal framework and navigates global interest rate dynamics and domestic revenue mobilisation challenges.
