Federal Government Domestic Debt Hits N87tn as Treasury Bills Drive Borrowing
Nigeria’s Federal Government domestic debt climbed to N87 trillion at the end of the second quarter of 2026, raising fresh concerns about refinancing risks as the government increasingly relies on short-term Treasury bills to meet its financing needs.
The latest figure represents a 5 percent increase from N82.9 trillion in the first quarter and a 13.6 percent increase from N76.6 trillion recorded in the second quarter of 2025.
The composition of the new borrowing is perhaps more significant than the headline figure.
Treasury bills accounted for the largest portion of the quarterly increase, with the outstanding stock rising by N2.9 trillion, or 17.6 percent, during the quarter to reach N19.5 trillion.
That increase represented 71 percent of the N4.1 trillion quarterly rise in the Federal Government’s domestic debt.
The growing dependence on Treasury bills creates a refinancing challenge because they generally mature much sooner than conventional government bonds.
This means the Federal Government must return to the domestic market more frequently to refinance maturing obligations. If interest rates remain high, rolling over those obligations could become increasingly expensive.
FGN bonds remain the largest component of the domestic debt portfolio, accounting for about 74.5 percent of total domestic debt.
The bond stock rose 2.2 percent quarter-on-quarter and 6.9 percent year-on-year to N64.8 trillion. Of that amount, naira-denominated bonds accounted for N41.5 trillion, while securitised Ways and Means advances stood at N22.1 trillion.
At first glance, the N87 trillion domestic debt figure appears alarming. But the debt-to-GDP ratio provides a more nuanced picture.
The domestic debt stock represents roughly 20.2 percent of Nigeria’s 2025 GDP, but the ratio falls to approximately 17 percent when measured against projected 2026 GDP.
This suggests that Nigeria’s immediate fiscal challenge is not necessarily the absolute size of domestic debt alone, but the relationship between debt obligations, interest costs and government revenue.
Nigeria has historically struggled with a relatively narrow revenue base. Consequently, even a debt level that appears manageable relative to GDP can become problematic if government revenue is insufficient to comfortably service it.
The increase in Treasury-bill borrowing could also affect the private sector.
Because banks and institutional investors allocate significant funds to government securities, increased government borrowing can influence the amount of capital available for businesses, as well as market interest rates and liquidity conditions.
The government therefore faces a difficult task: raise enough money to finance its fiscal obligations without allowing short-term borrowing and high interest costs to crowd out private investment.
Ultimately, the sustainability question is shifting from simply “How much does Nigeria owe?” to “How frequently must Nigeria refinance its debt, and at what cost?”
