FG’s domestic borrowing hits N6.17trn in 6 months, over N13trn to be raised by year-end

By Uche Usim

The federal government has borrowed N6.17 trillion from local lenders in the first six months of 2025 to finance budget shortfalls.

This shows that the government is increasingly relying on domestic funding to cover its spending.

Data from the Debt Management Office (DMO) show that the borrowings came mainly through Federal Government Bonds (FGN Bonds), Nigerian Treasury Bills (NTBs) and Promissory Notes (P-Notes), which form the backbone of Nigeria’s domestic debt structure.

The DMO reports that N4.48 trillion was raised in the first quarter, followed by N1.7 trillion in the second quarter, a modest 2.26% increase over the previous period, bringing total domestic borrowings as of June 30, 2025, to N76.59 trillion.

With oil production still below 1.8 million barrels per day and non-oil revenues underperforming, the government has increasingly turned to the domestic debt market to sustain spending.

The Medium-Term Expenditure Framework (MTEF) projects that over N13 trillion will be raised in 2025, a target that may be exceeded if borrowing continues at the current pace.

Analysis of the DMO data shows that FGN Bonds account for nearly 80% of total domestic borrowings, making them the central instrument of Nigeria’s debt strategy. As of June, the total stock of FGN Bonds stood at N60.65 trillion, comprising Naira-denominated bonds (N36.52 trillion), Securitised Ways and Means Advances (N22.72 trillion), and US Dollar bonds (N1.40 trillion). The securitisation of Ways and Means Advances in 2024, a facility previously extended by the Central Bank of Nigeria, added substantial weight to the domestic debt portfolio.

Treasury Bills held a key share at N12.76 trillion, representing 16.67% of total borrowings. Analysts note that the increase in T-Bill issuance reflects a strategy to attract short-term liquidity while managing rollover risks in a high-yield environment. Other instruments, including FGN Sukuk (N1.29 trillion), Savings Bonds (N91.53 billion), Green Bonds (N62.35 billion), and Promissory Notes (N1.73 trillion), provide further diversification. Promissory Notes, which account for 2.26% of total domestic borrowing, are non-interest-bearing instruments used primarily to settle arrears and contractor obligations.

The borrowing pattern highlights a government facing fiscal pressure while benefiting from investor confidence in sovereign instruments. Domestic debt rose from N74.89 trillion at March 31, 2025, to N76.59 trillion by June 30, an increase of N1.70 trillion. Cordros Capital reports that total public debt climbed 2% quarter-on-quarter to N152.4 trillion in Q2 2025 from N149.39 trillion in Q1, with domestic debt accounting for 52.9% and external debt 47.1%, or USD46.98 billion. The small increase in external debt reflects fresh disbursements from the World Bank (USD1.15 billion) and the African Development Bank (USD12.14 million).

In Naira terms, external debt rose 1.7% quarter-on-quarter to N71.85 trillion, based on an average exchange rate of N1,529.21/USD in Q2. Year-on-year, Nigeria’s total debt stock expanded by 113.5%, driven largely by the naira’s depreciation and higher domestic borrowings.

While rising debt has drawn criticism, analysts say the sustained subscription to government securities reflects the resilience of Nigeria’s domestic capital market.

Investors appear to prefer sovereign instruments as a safe haven amid inflation and macroeconomic volatility.

Rising debt levels also highlight concerns about fiscal sustainability and debt servicing costs, which already consume a large share of government revenue.

Cordros Capital projects total public debt will reach N152.11 trillion by year-end, equivalent to 35.5% of GDP, putting pressure on policymakers to balance short-term fiscal stimulus with long-term economic stability.

The securitisation of Ways and Means advances has provided short-term relief by converting overdrafts into long-term debt. However, the structural gap between recurrent expenditure and revenue remains unresolved, signaling that borrowing alone cannot close Nigeria’s fiscal imbalances.

The first half of 2025 underscores Nigeria’s reliance on the domestic debt market to finance government spending amid weak oil revenue and subdued non-oil receipts. FGN Bonds, Treasury Bills, and other innovative instruments like Promissory Notes and Sukuk are central to this strategy. As borrowing continues, the challenge for policymakers will be to ensure that debt accumulation translates into productive investment while maintaining fiscal prudence and long-term economic stability.