Nigeria is showing some degree of fiscal responsibility as it brings its burden of promissory notes under control, a prudent but firm action to rein in its out-of-control debt profile.
The nation’s outstanding promissory notes fell 15.6 percent in the first quarter of 2025 to N1.301 trillion as of March from N1.542 trillion in December 2024. It represents a year-on-year fall of 17.1 percent and speaks volumes about the collective effort of the federal government in restoring credibility and boosting investor confidence.
Promissory notes, de facto state undertakings to pay certain future obligations, have been a concessionary instrument prompted to fund payment arrears owed to contractors and suppliers of services. The notes have been an interim measure to fund liquidity shortage whenever the budgetary provision is low. But frequent resort to such outlets over the years in the absence of foundational revenues has spawned Nigeria’s mounting debt issue.
The Office of the Government Accountant General recently affirmed the commitment of the government to settle verified debt paid. It affirmed the ongoing payment on completed projects in MDAs and with great passion to make value for public money.
Despite the retreat of the promissory notes in the country, the overall debt narrative is not that one. The domestic debt of Nigeria is N78.76 trillion as of the end of March 2025, rising from over N13 trillion last year. That means year-on-year growth of almost 20 percent and third-quarter growth of almost 6 percent. Growth is largely facilitated by new borrowing, which finds its way into budget deficit financing.
Under the dis-aggregation of figures, Federal Government bonds rose by a wide margin from N55.4 trillion to N59.8 trillion. Treasury bills rose by a narrow margin from N12.4 trillion to N12.7 trillion, and savings bonds rose to N82.7 billion from N72.9 billion. Sukuk and green bonds were unchanged at N992.6 billion and N15 billion, respectively.
Nigeria’s foreign debt has also recorded an upward trend, standing at N70.63 trillion at the end of business in March 2025. It is an impressive increase from N56.02 trillion at the end of March 2024, a 26.1 percent year-over-year expansion. The slight quarter-on-quarter growth, however, is evidence that the rate of new foreign borrowings is decelerating.
Nigeria’s foreign debt composition consists of borrowing from multilateral institutions such as World Bank and African Development Bank, bilateral creditors, and commercial creditors such as Eurobond holders. As naira continues to depreciate, external debt service in naira terms becomes increasingly burdensome. Burden of debt service can further constrict fiscal space in Nigeria unless ongoing monetary and currency reforms are able to trigger the needed stabilization.
Earlier this year, the government’s capacity to retire matured promissory notes came under scrutiny when the Central Bank of Nigeria turned down further requests for overdraft. Issuing promissory notes instead of matching revenue to back it is still among the reasons why the debt stock keeps increasing in the nation, says Director-General, DMO, Patience Oniha. She put emphasis on mobilizing additional revenue collection as strategies for closing dependence on day-to-day government expenditure and borrowing.
As a step towards these rising issues, budget administrators and the Central Bank have turned austere, undertaking rolling over of maturing obligations, keeping monetary policy in check, and refinancing debt management strategies.
The future is still gloomy, but the decline in promissory note obligations is some silver lining Nigeria is currently on the right path of debt financing in a sustainable way. With domestic and foreign debt increasing, careful management of finance, mobilization of revenues, and greater fiscal discipline will avoid debt crisis in the future.
