The Federal Government of Nigeria’s (FGN) public debt profile has continued to shoot upward as its domestic debt service increased by 13% Y-o-Y to N989bn in Q1 2024. The figure marks the highest domestic debt service payment recorded for the first quarter in its data history. The main driver behind the mounting debt service burden is the significant rise of 149% Y-o-Y in the FGN’s domestic debt stock to N61.6trn as of the end of Q1 2024. The securitisation of the ways can explain a significant proportion of the increase and means advanced by the CBN, of which N22.7trn was securitised in Q2 2023. The National Assembly approved the securitisation of an additional N7.3trn in Q4 2023.
The higher interest rate Y-o-Y reflects the elevated interest rate environment following the CBN’s monetary tightening measures.
- Interest payments on FGN bonds accounted for 81% of total debt service cost during the quarter, broadly comparable with 83% in Q1 2023. However, interest payments on FGN bonds grew 10% Y-o-Y to N797bn.
- Interest payments on Nigerian Treasury Bills (NTBs), the second most significant debt service component, increased by 71% Y-o-Y to N97bn.
- The third most significant debt service component was the principal repayments on the FGN’s promissory notes, which amounted to N87bn.
- So far this year, the DMO has issued around N3.6trn worth of FGN paper, or N3.7trn if non-competitive bids are considered.
- To meet its full-year funding target of N6.1trn, the agency must issue around N3.0trn in additional domestic debt by the end of Q4 2024.
- Given the substantial new borrowings the federal government will need to tap from the domestic market, its domestic debt service costs are poised to track higher in the periods ahead.
