Nigeria spent N3.1trn on domestic debt servicing in Q1 – DMO

Nigeria’s Federal Government spent N3.14 trillion servicing its domestic debt in the first quarter of 2026, with interest payments accounting for the overwhelming majority of the expenditure, according to data released by the Debt Management Office (DMO).

The latest figures highlight the growing cost of servicing Nigeria’s domestic obligations and the increasing pressure that debt-service commitments can place on government finances. Of the N3.14 trillion spent between January and March, N2.97 trillion went towards interest payments, while N169.68 billion was used for principal repayments.

The monthly figures show that domestic debt-service costs increased substantially throughout the quarter. The government spent N741.82 billion in January, followed by N967.67 billion in February. By March, the amount had risen sharply to N1.43 trillion. The March figure was 47.7 percent higher than February’s expenditure and 92.7 percent above January’s level.

The composition of the expenditure is particularly significant. Interest payments represented approximately 94.6 percent of the total domestic debt-service bill during the quarter, leaving only a relatively small proportion for repayment of principal. This means that most of the resources devoted to domestic debt servicing did not reduce the underlying debt stock directly but were used to meet the cost of borrowing.

Federal Government bonds accounted for N1.96 trillion of the interest payments, while Treasury bills accounted for about N1 trillion. The principal repayment component, meanwhile, consisted of N169.68 billion in repayments on local-currency-denominated promissory notes.

The data comes against the backdrop of a sizeable public debt stock. Separate DMO figures show that Nigeria’s total public debt stood at approximately N159.35 trillion as of March 31, 2026. Domestic debt accounted for N87.4 trillion, or 54.85 percent of the total, while external debt stood at N71.95 trillion, representing 45.15 percent.

The domestic component has continued to represent the larger share of Nigeria’s overall public debt. According to the reported DMO figures, domestic debt increased from N78.76 trillion in March 2025 to N87.4 trillion in March 2026, an increase of about N8.64 trillion, or 11 percent. Compared with December 2025, domestic debt was also higher by N2.55 trillion.

The structure of the debt is important because domestic borrowing exposes the government to the cost of raising funds within Nigeria’s financial market. Interest rates and market conditions therefore have a direct bearing on the cost of servicing domestic obligations. As borrowing costs remain elevated, new domestic borrowing can translate into higher future debt-service requirements.

For government finances, the challenge extends beyond the size of the debt itself. The ability to service debt sustainably depends heavily on revenue generation and the government’s capacity to meet its obligations without excessively reducing resources available for other priorities. Large debt-service bills can place pressure on spending for infrastructure, healthcare, education, security and other public programmes.

The concentration of expenditure on interest payments also underscores the importance of managing the cost and structure of government borrowing. Where a substantial portion of government revenue is committed to interest payments, the fiscal space available for productive expenditure can become increasingly constrained.

The first-quarter figures therefore reinforce the importance of Nigeria’s ongoing efforts to improve domestic revenue mobilisation. Stronger revenue collection can reduce reliance on borrowing and provide the government with greater capacity to finance public expenditure without continually increasing debt-service obligations.

Economic growth is equally important to the sustainability equation. A growing economy can expand the government’s tax base and improve revenue generation, provided that growth translates into higher formal-sector activity, stronger corporate earnings and increased consumption. Policies that encourage investment and productivity can consequently support fiscal sustainability over the longer term.

The figures also highlight the need for careful debt-management strategies. Government borrowing can be necessary to finance infrastructure and other investments capable of generating economic returns, but the benefits of borrowing depend on how effectively borrowed funds are deployed. Borrowing that supports productive assets can potentially strengthen future revenue and economic capacity, while borrowing primarily to finance recurring expenditure can create additional pressure on future budgets.

For investors and financial-market participants, the DMO data provides an important indicator of the government’s financing requirements and the role domestic securities continue to play in Nigeria’s financial system. Treasury bills and Federal Government bonds remain major instruments through which the government raises funds, while banks and other investors participate in the domestic debt market.

The sharp increase in debt servicing in March also demonstrates how repayment schedules and interest obligations can create significant variations in monthly fiscal expenditure. The N1.43 trillion recorded in March represented almost half of the total domestic debt-service expenditure for the first quarter, according to the DMO figures.

Nevertheless, the figures should not be interpreted solely as evidence of an unsustainable debt position. Debt sustainability requires a broader assessment involving the size and maturity of obligations, interest rates, government revenue, economic growth, foreign-exchange conditions and the purpose for which borrowed funds are used.

What is clear from the first-quarter data is that domestic debt servicing has become a significant component of Nigeria’s fiscal burden. With N3.14 trillion spent in just three months, policymakers face the continuing challenge of balancing the need to finance national development with the imperative of keeping borrowing costs and debt-service obligations manageable.

As Nigeria moves forward, stronger revenue mobilisation, prudent borrowing, efficient expenditure and productive investment will remain critical. The objective must be to ensure that borrowing supports economic expansion and revenue generation rather than creating a cycle in which an increasing share of government resources is consumed by debt servicing.

The DMO’s latest figures consequently offer a clear reminder that the sustainability of Nigeria’s public finances will depend not only on how much the government borrows, but also on the cost of that borrowing, the quality of expenditure and the country’s ability to generate sufficient revenue to meet its obligations while continuing to invest in economic development.