The Federal Government of Nigeria has scaled back its domestic borrowing in the first quarter of 2025, with investors subscribing to N2.83 trillion in FGN bonds, down from N3.12 trillion in Q1 2024, according to data released by the Debt Management Office (DMO).
This reduction follows a deliberate cut in bond offerings, as the government seeks to temper its borrowing amid elevated interest rates and mounting concerns over the country’s rising public debt. The move comes against a backdrop of escalating external debt pressures, as highlighted by the Central Bank of Nigeria (CBN) in its Fourth Quarter 2024 Economic Report, published Monday.
The CBN report revealed that Nigeria’s external debt reached N66.14 trillion—equivalent to $43.03 billion—as of Q3 2024, up 0.30% from $42.90 billion in Q2 2024. This persistent increase underscores the nation’s growing reliance on foreign loans, a trend that has intensified the debt-servicing burden.
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By September 2024, Nigeria had paid $1.34 billion to service its external debt, comprising $0.72 billion in principal repayments (53.73%) and $0.62 billion in interest (46.27%). These figures have amplified public and policy concerns, and are believed to have prompted the government to adopt a more cautious stance in the bond market.
Details of FGN Bonds
In Q1 2025, the Federal Government offered N1.10 trillion in FGN bonds, a significant 66.8% decrease from the N3.31 trillion offered in Q1 2024. The DMO allotted N1.94 trillion, a 23% drop from the N2.52 trillion allotted a year earlier. The reduced offerings reflect a strategic shift aimed at moderating domestic debt accumulation while enhancing liquidity in existing bonds, a response to the high cost of borrowing in the current interest rate environment.
The bond market’s performance varied across the quarter. In January 2025, the government offered N450 billion across three instruments: the 5-year 19.30% FGN APR 2029, the 7-year 18.50% FGN FEB 2031, and a new 10-year 22.60% FGN JAN 2035 bond. Subscriptions totaled N669.94 billion, with N601.04 billion allotted through competitive bidding—no non-competitive allotments were recorded.
In comparison, January 2024 saw an N360 billion offer attract N604.56 billion in bids, with N418.2 billion allotted. Marginal rates in January 2025 ranged from 21.79% to 22.60%, a sharp rise from 15.00% to 16.50% in January 2024, reflecting the higher cost of funds.
February 2025 saw a reduced offer of N350 billion, split between the 5-year and 7-year bonds. Investor demand surged to N1.63 trillion, far exceeding the offer, though the DMO allotted N910.39 billion, exercising restraint. By contrast, February 2024 featured a N2.5 trillion offer, with N1.495 trillion allotted, marking the quarter’s peak activity. In March 2025, the government offered N300 billion across two bonds: a re-opened 5-year 19.30% FGN APR 2029 and a 9-year 19.89% FGN MAY 2033.
Subscriptions reached N530.31 billion, with N423.68 billion allotted, including N152.45 billion in non-competitive bids, signaling strong institutional interest. In March 2024, a N450 billion offer drew N615.01 billion in bids and N475.66 billion in allotments. Marginal rates eased to 19.00%–19.99% by March 2025, suggesting a slight softening of rate pressures.
A Shift Amid Debt Concerns
The decline in bond offerings signals a broader effort to manage Nigeria’s fiscal challenges. The CBN’s report underscores the stakes, which saw external debt rise 3.40% year-on-year from $41.59 billion in Q3 2023, with servicing costs consuming significant resources. The $1.34 billion paid by September 2024 highlights the strain, particularly as public frustration grows over the lack of visible returns from borrowed funds.
The government’s more measured approach in 2025 aims to balance immediate financing needs with long-term debt sustainability, a critical task in an era of high interest rates.
Despite the reduced supply, investor appetite remains robust, particularly for medium- and long-term bonds like the 7-year and 10-year instruments, which appeal to institutional players such as pension funds aligning assets with liabilities. The DMO’s strategy also supports secondary market liquidity and maintains benchmark bonds across key tenors, facilitating price discovery.
Analysts note that while the government is borrowing less aggressively, the underlying debt stock—N66.14 trillion externally alone—continues to grow, albeit at a slower pace.