Nigeria borrowed N6.17 trillion locally in H1 2025 to fund its budget, reflecting rising dependence on domestic debt and investor confidence

Nigeria domestic borrowing 2025 surged as the Federal Government raised N6.17 trillion from local lenders in the first half of the year to finance budget shortfalls, signalling growing dependence on domestic funding amid weak oil and non-oil revenues.

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According to data from the Debt Management Office (DMO), the borrowings were largely through Federal Government Bonds (FGN Bonds), Nigerian Treasury Bills (NTBs) and Promissory Notes (P-Notes) — the core instruments of Nigeria’s domestic debt strategy.

The DMO reported that N4.48 trillion was raised in Q1 2025, followed by N1.7 trillion in Q2, a modest 2.26% rise, bringing total domestic borrowings to N76.59 trillion as of June 30, 2025.

With oil production still below 1.8 million barrels per day and non-oil revenues underperforming, government financing has shifted further towards local debt markets. The Medium-Term Expenditure Framework (MTEF) projects over N13 trillion in domestic borrowing for 2025 — a target that may be surpassed if current trends persist.

FGN Bonds account for nearly 80% of total domestic borrowings, valued at N60.65 trillion, including N36.52 trillion in Naira bonds, N22.72 trillion in securitised Ways and Means Advances, and N1.40 trillion in dollar-denominated bonds.

Treasury Bills contributed N12.76 trillion (16.67%), reflecting increased short-term issuances to attract liquidity and manage rollover risks in a high-yield environment.

Other debt instruments include FGN Sukuk (N1.29 trillion), Savings Bonds (N91.53 billion), Green Bonds (N62.35 billion), and Promissory Notes (N1.73 trillion).

Nigeria’s total public debt rose 2% quarter-on-quarter to N152.4 trillion in Q2 2025, up from N149.39 trillion in Q1, with domestic debt making up 52.9% and external debt 47.1% (USD46.98 billion).

External debt increased slightly due to new disbursements from the World Bank (USD1.15 billion) and the African Development Bank (USD12.14 million).

In naira terms, external debt climbed 1.7% q/q to N71.85 trillion, based on an average exchange rate of N1,529.21/USD in Q2.

Analysts note that while rising debt has sparked fiscal concerns, strong investor demand for government securities shows continued confidence in Nigeria’s domestic capital market.

However, high debt-servicing costs — consuming a large share of revenue — underscore the need for structural fiscal reforms.

Financial analysts at Cordros Capital project total public debt could reach N152.11 trillion by year-end, about 35.5% of GDP, intensifying pressure on policymakers to balance fiscal stimulus with long-term sustainability.

The securitisation of Ways and Means advances has provided short-term relief, but experts warn that borrowing alone cannot close the gap between expenditure and revenue.

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As Nigeria deepens its reliance on local debt markets, the key challenge remains ensuring that rising borrowings fuel productive investments and sustainable economic growth rather than perpetuating fiscal vulnerabilities.