The Federal Government of Nigeria has borrowed N6.17 trillion from the domestic debt market in the first half of 2025 to finance its budget deficit, according to data from the Debt Management Office (DMO). The borrowings, primarily through Federal Government Bonds (FGN Bonds), Nigerian Treasury Bills (NTBs), and Promissory Notes, reflect the government’s reliance on local markets amid challenges in oil production and non-oil revenue shortfalls.
Borrowing Breakdown
In the first quarter of 2025, the government raised N4.48 trillion, followed by an additional N1.70 trillion in the second quarter, marking a 2.26% increase. This brought Nigeria’s total domestic debt to N76.59 trillion by June 30, 2025. FGN Bonds dominated, accounting for nearly 80% of borrowings, with a total of N60.65 trillion, including N36.52 trillion in Naira-denominated bonds, N22.72 trillion in securitized Ways and Means Advances, and N1.40 trillion in US Dollar bonds. Treasury Bills contributed N12.76 trillion (16.67%), while other instruments like FGN Sukuk (N1.29 trillion), Savings Bonds (N91.53 billion), Green Bonds (N62.35 billion), and Promissory Notes (N1.73 trillion) rounded out the portfolio.
The securitization of Ways and Means Advances, previously provided by the Central Bank of Nigeria (CBN), has shifted short-term overdrafts into long-term bonds, significantly expanding the domestic debt profile. Promissory Notes, used to settle government arrears, represent 2.26% of the total borrowings and are non-interest-bearing.
Fiscal Challenges and Market Confidence
The surge in borrowing reflects fiscal pressures, with oil production falling short of the 1.8 million barrels per day target and non-oil revenues underperforming. The government’s Medium-Term Expenditure Framework projects raising over N13 trillion domestically in 2025 to bridge the budget deficit, a target that could be exceeded at the current pace. Despite these challenges, the sustained demand for government securities highlights strong investor confidence in Nigeria’s domestic capital market, driven by the relative safety of sovereign instruments in a volatile economic environment.
Total public debt reached N152.4 trillion in Q2 2025, up 2% from N149.39 trillion in Q1, with domestic debt comprising 52.9% and external debt (USD46.98 billion) accounting for 47.1%. The naira’s depreciation has amplified the naira value of external debt, which rose 1.7% to N71.85 trillion, fueled by new loans from the World Bank (USD1.15 billion) and the African Development Bank (USD12.14 million).
Sustainability Concerns
The rising debt stock has sparked concerns about fiscal sustainability, as debt servicing consumes a significant portion of government revenue. With FGN Bond yields averaging 18–21% and inflation around 23%, real interest rates remain negative, increasing refinancing risks. Analysts warn that heavy borrowing may crowd out private sector credit, hindering economic recovery. However, the use of Sukuk and Green Bonds signals efforts to align borrowing with sustainable and ethical investment goals.
Charles Fakrogha, MD/CEO of Maxfund Africa Limited, emphasized the importance of deploying borrowed funds effectively: “Borrowing is not inherently problematic if funds are invested in productive sectors that drive growth and job creation. The government’s infrastructure projects and economic reforms are showing positive results, but transparency in fund utilization is crucial to ensure long-term benefits.”
Looking Ahead
Preliminary estimates suggest an additional N3 trillion in borrowings, bringing the 2025 domestic total to nearly N9 trillion. With total public debt projected to hit N152.11 trillion by year-end (35.5% of GDP), policymakers face the challenge of balancing fiscal stimulus with sustainable debt management. Enhancing revenue generation and curbing non-productive spending will be critical to maintaining economic stability while leveraging domestic borrowing to support infrastructure and development goals.
