The Debt Management Office (DMO) has reported an increase in Nigeria’s domestic debt stock, reaching N66.957 trillion by mid-2024, up 8.74 per cent from N61.578 trillion at the end of Q1. This rise reflects the federal government’s continued reliance on domestic borrowing to address a widening fiscal deficit and fund economic needs.
In Q2 2024 alone, the government raised N5.379 trillion through instruments like FGN Bonds, Nigerian Treasury Bills (NTBs), FGN Savings Bonds, and Promissory Notes, supported by the DMO and the Central Bank of Nigeria (CBN). The debt level grew by 15.62 per cent in Q1, indicating an aggressive early-year borrowing strategy as the government tackled a significant budget deficit forecast of N9.1 trillion, roughly 3.8 per cent of GDP.
Additional factors contributing to the debt rise include CBN’s monetary tightening to control inflation, which involved raising the monetary policy rate. This strategy increased investor interest in government securities, deemed low-risk and tax-exempt, which in turn has driven up the cost of debt servicing.
FGN Bonds dominate the debt stock at N52.315 trillion, or 78.13 per cent, contributing N8.055 trillion of the new debt raised in H1. Nigerian Treasury Bills (NTBs) represent 17.64 per cent of the domestic debt stock at N11.808 trillion, raising N5.286 trillion in H1, accounting for 38.59 per cent of new debt. Promissory Notes contribute a total debt of N1.671 trillion (2.5% share), with N342.654 billion raised. FGN Savings Bonds contributed a modest N55.2 billion, or 0.08 per cent of the debt stock, with an additional N16.091 billion raised in H1.
FGN Sukuk and Green Bonds maintained their existing balances, with no new issuances in the first half of 2024.
Additionally, as deficits continue to rise, the federal government introduced a new ‘domestic dollar bond’ in Q3, indicating further domestic borrowing is likely. Investors may see increasing returns on debt instruments as CBN’s monetary policy rate hikes continue amid inflationary pressures. This borrowing trend signals higher debt servicing costs and a growing reliance on domestic markets for fiscal financing.
