Nigeria’s Promissory Notes Debt Falls 15.6% by March 2025 Amid Fiscal Reforms

In a significant development for Nigeria’s fiscal landscape, the country’s promissory notes debt obligations decreased by 15.6% to N1.49 trillion as of March 31, 2025, down from N1.77 trillion in September 2024, according to data from the Debt Management Office (DMO). This reduction, equivalent to approximately N280 billion, reflects the Federal Government’s efforts to manage its domestic debt under President Bola Tinubu’s administration, despite a broader public debt surge to N149.39 trillion. As Nigeria grapples with fiscal challenges, including naira depreciation and rising debt servicing costs, this decline in promissory notes signals a strategic shift toward prudent debt management. This article examines the reasons behind the drop, its implications, and the broader economic context, drawing on sources like Nairametrics, Punch Newspapers, and Daily Trust.

Understanding Promissory Notes and the Decline

Promissory notes are debt instruments issued by the Nigerian government to settle obligations it cannot immediately fund with revenue, such as payments to contractors, oil marketers, exporters, and judgment creditors. These notes, both naira- and dollar-denominated, have been a growing component of Nigeria’s domestic debt, rising 114% to N1.65 trillion by June 2024 from N770 billion when Tinubu took office in May 2023, per Nairametrics. The 15.6% reduction to N1.49 trillion by March 2025 marks a reversal, driven by several factors:

• Reduced Issuance: The DMO’s Federal Government Domestic Debt Stock by Instrument report for Q1 2025 indicates fewer new promissory notes were issued, reflecting a cautious approach to new commitments. This aligns with Vice President Kashim Shettima’s claim that states are adopting fiscally responsible policies, with many avoiding borrowing for 2025 budgets, per Punch Newspapers.
• Repayments and Restructuring: The DMO notes principal repayments of N265.86 billion on promissory notes in 2024, a slight 4.08% decrease from N277.16 billion in 2023, suggesting steady redemption efforts. A $57.02 million foreign-denominated note for judgment creditors, due February 15, 2025, was redeemed by March 28, 2025, at an exchange rate of N1,537.62/USD, per Daily Trust.
• Policy Shifts: The Central Bank of Nigeria (CBN), under Governor Yemi Cardoso, has restricted Ways and Means Advances, a key funding source for promissory notes, forcing the government to prioritize repayments over new borrowing, per Nairametrics. The conversion of N22.7 trillion in Ways and Means debt into tradable bonds in 2023 also eased pressure on short-term obligations.

Broader Debt Context

Despite the promissory notes decline, Nigeria’s total public debt rose 3.3% to N149.39 trillion by March 2025 from N144.67 trillion in December 2024, per the DMO. Domestic debt reached N78.76 trillion, up 5.9% from N74.38 trillion, driven by FGN Bonds (N55.44 trillion) and Treasury Bills (N4.72 trillion), while external debt hit N70.63 trillion ($45.98 billion), per Daily Trust. The naira’s depreciation—from N1,330.26/USD in Q1 2024 to N1,536.32/USD in Q1 2025—amplified external debt costs in naira terms, per Punch Newspapers.

Debt servicing remains a burden, with N13.12 trillion spent in 2024, a 68% increase from N7.8 trillion in 2023, and N16 trillion earmarked for 2025, per GTI Research. Promissory notes, at 1.89% of domestic debt, are a small but critical component, used for obligations like the Export Expansion Grant (EEG) and contractor payments. The 2024 budget deficit of N9.1 trillion, exceeding the 3.8% GDP target, underscores fiscal pressures, worsened by a N6.2 trillion supplementary budget, per Nairametrics.

Reasons for the Decline

The 15.6% reduction in promissory notes reflects deliberate fiscal strategies:

• Revenue Mobilization: Finance Minister Wale Edun reported an 87% increase in Nigeria Customs Service revenue and a 56% rise in Federal Inland Revenue Service collections in Q1 2024, enabling debt repayments without new borrowing, per Federal Ministry of Finance.
• CBN Restrictions: The CBN’s refusal to extend overdrafts, as noted by Nairametrics, forced the government to prioritize existing obligations, reducing reliance on promissory notes.
• Debt Restructuring: The repayment of N4.5 trillion in Ways and Means Advances in 2024 and the issuance of $2.2 billion in Eurobonds in December 2024 diversified funding sources, easing pressure on promissory notes, per Nairametrics.
• Fiscal Reforms: Shettima’s emphasis on public-private partnerships and organic revenue generation, per GTI Research, signals a shift from unsustainable borrowing, aligning with Tinubu’s Renewed Hope Agenda.

Implications for Nigeria’s Economy

The reduction in promissory notes is a positive signal for fiscal discipline, potentially easing concerns about default risks raised in 2024 when the CBN declined overdraft requests, per Nairametrics. However, challenges persist:

• Debt Sustainability: With total debt at N149.39 trillion and a 2025 budget deficit of N13 trillion (23.6% of the N55 trillion budget), per GTI Research, Nigeria’s debt-to-GDP ratio remains high, raising sustainability concerns.
• Naira Depreciation: The naira’s 15.5% depreciation from Q1 2024 to Q1 2025 inflates external debt servicing costs, with $4.66 billion spent in 2024, per Punch Newspapers.
• Economic Growth: A 3% GDP growth rate for three quarters, per Minister Abubakar Bagudu, offers optimism, but rising debt servicing (47% of 2024 expenditure) limits funds for infrastructure and social programs, per Legit.ng.

Public and Expert Reactions

Analysts on X, like @NaijaEcon, praised the promissory notes decline as a “step toward fiscal sanity,” but others, like @EconWatchNG, warned that naira depreciation could offset gains. Punch Newspapers noted domestic bondholders’ benefits from high debt servicing payments, while Nairametrics emphasized the need for revenue diversification to sustain progress. Critics argue the government’s reliance on FGN Bonds (78.95% of domestic debt) and new loans, like a $500 million World Bank facility for agriculture, risks future debt spikes, per Punch Newspapers.

What This Means for Nigeria

The 15.6% drop in promissory notes to N1.49 trillion by March 2025 is a rare bright spot in Nigeria’s debt profile, reflecting Tinubu’s reforms to curb borrowing and boost revenue. However, with total debt at N149.39 trillion and servicing costs consuming nearly half of expenditure, fiscal challenges remain. For citizens, this could mean more funds for development if reforms continue, but naira depreciation and global interest rates pose risks. Follow updates on www.dmo.gov.ng or X for real-time insights, and support policies promoting revenue generation to ensure sustainability.