Nigeria’s domestic debt servicing soars 164% in Q1 2025

Nigeria’s domestic debt servicing bill jumped by 164 percent year-on-year in the first quarter of 2025, as the federal government faced higher interest payments on Treasury Bills and Federal Government bonds, according to figures released by the Debt Management Office (DMO).

The data shows that the government spent N2.6 trillion servicing domestic debt between January and March—up 65 percent from the final quarter of 2024.

Analysts at FBNQuest Merchant Bank attributed the surge to a recurring seasonal trend where debt repayments typically spike in the first quarter, due to a heavy concentration of debt issuances at the start of the year.

Treasury Bills were a major contributor to the increase. Payments on Nigerian Treasury Bills (NTBs) more than doubled to N961 billion in Q1 2025, up from N374 billion in Q4 2024, pushing their share of total domestic debt servicing to 36.8 percent—up from 23.7 percent previously.

Interest payments on Federal Government bonds also rose sharply, accounting for 54 percent of total domestic debt servicing.

Bond-related payments climbed 47 percent year-on-year to over N1.4 trillion, with conventional bonds alone making up N1.3 trillion of that figure.

Additionally, interest on foreign currency-denominated domestic bonds stood at nearly N68 billion.

FBNQuest warned in a recent note to clients that the growing cost of domestic debt servicing highlights the continued fiscal pressures facing the federal government, driven largely by underperforming revenues.

“With public debt on the rise, interest payments are set to remain a heavy drag on the federal budget,” the bank stated.

“We expect debt service to continue absorbing a large share of government revenue, posing a risk to fiscal sustainability.”

Nigeria’s total public debt rose by N27.72 trillion in the past year, reaching N149.39 trillion, with the weak naira significantly inflating external debt obligations.

However, there may be relief on the horizon.

The federal government has signed into law four major tax reform bills, set to take effect in 2026.

Analysts believe the reforms could help broaden the country’s revenue base—raising tax-to-GDP from 10 percent to an estimated 18 percent—and reduce reliance on borrowing.

Despite the optimism, FBNQuest cautioned that the fiscal benefits of the reforms will take time to materialize.

“The delayed implementation timeline means key measures won’t begin delivering revenue gains until 2026,” the firm noted.