A N166.79 trillion public debt burden is putting increasing pressure on the federal government’s fiscal space, as the cost of servicing existing obligations continues to consume substantial resources and domestic borrowing remains the dominant source of financing.
The latest debt data from the Debt Management Office (DMO), analysed by Cowry Research, showed that total public debt stood at N166.79 trillion as of June 30, 2026, up from N159.35 trillion in March.
Domestic debt accounted for N91.59 trillion, or 54.91 percent, of the total debt stock, while external debt stood at N75.20 trillion, representing 45.09 percent.
In dollar terms, the total public debt amounted to $120.93 billion, comprising $66.41 billion in domestic obligations and $54.52 billion in external debt.
The federal government accounted for the bulk of the debt portfolio, with N86.99 trillion in domestic debt and N65.77 trillion in external debt, while the states and Federal Capital Territory accounted for N4.59 trillion and N9.42 trillion, respectively.
Beyond the headline debt stock, the immediate fiscal pressure is increasingly reflected in the cost of servicing the obligations.
Between April and June 2026, the federal government recorded N2.14 trillion in domestic debt service, comprising N1.98 trillion in interest and rental payments and N164.28 billion in principal repayments.
Interest therefore accounted for approximately 92.3 percent of total domestic debt service during the quarter.
Monthly payments remained substantial, rising from N765.19 billion in April to N811.62 billion in June, after falling to N567.16 billion in May.
FGN bonds dominate domestic debt
Market-based financing continues to play a central role in meeting Federal Government fiscal obligations.
Of the N86.99 trillion domestic debt stock owed by the federal government, FGN bonds accounted for N64.84 trillion, or 74.53 percent, while Nigerian Treasury Bills stood at N19.48 trillion, equivalent to 22.39 percent.
A significant N22.11 trillion of the FGN bond portfolio represents securitised Ways and Means advances, reflecting the conversion of previous central bank financing into formal government debt obligations.
Other instruments include N1.19 trillion in Sukuk, N1.22 trillion in promissory notes, N122.45 billion in FGN Savings Bonds and N47.36 billion in Green Bonds.
The structure leaves the government particularly sensitive to movements in domestic interest rates, given the large volume of interest-bearing market instruments.
External obligations expose finances to currency risks
External debt stood at $54.52 billion at the end of June, with multilateral creditors accounting for $24.76 billion, or 45.42 percent of the portfolio.
Commercial creditors accounted for $23.16 billion, or 42.47 percent, while bilateral creditors held $6.61 billion, or 12.12 percent.
The multilateral component includes significant exposure to the World Bank and African Development Bank groups, while China’s Exim Bank and China Development Bank remain important bilateral creditors.
The commercial portfolio includes $18.55 billion in Eurobonds, alongside syndicated facilities and a $1.50 billion Total Return Swap.
The diversified creditor base provides access to multiple sources of funding but also exposes public finances to global interest rates, investor risk appetite and movements in the naira exchange rate.
External debt service amounted to $870.73 million between April and June 2026, consisting of $339.75 million in principal repayments, $491.73 million in interest and $39.25 million in other charges.
Interest consequently represented approximately 56.5 percent of the external debt-service bill.
Commercial creditors accounted for $325.70 million of the payments, while multilateral and bilateral creditors received $404.22 million and $140.81 million, respectively.
Lagos accounts for 26% of state domestic debt
At the sub-national level, domestic debt across the 36 states and the FCT stood at N4.59 trillion as of June 30.
The debt stock remains highly concentrated, with Lagos accounting for N1.20 trillion, followed by Delta at N369.30 billion, the FCT at N358.79 billion and Rivers at N354.64 billion.
Edo recorded N214.93 billion, Ogun N189.05 billion and Bauchi N157.35 billion.
Lagos alone therefore represented roughly 26 percent of total domestic debt owed by the states and FCT.
While the aggregate sub-national debt remains relatively modest compared with Federal Government obligations, fiscal conditions vary considerably across states depending on internally generated revenue, federal allocations and expenditure commitments.
N7.84trn contingent liabilities remain outside debt stock
Adding another layer of fiscal risk is the N7.84 trillion stock of contingent liabilities recorded as of June 30, 2026.
These obligations are not included in the reported N166.79 trillion public debt stock because they represent potential rather than currently recognised liabilities.
The largest exposures include N2.74 trillion linked to collateral for the Total Return Swap, N1.88 trillion in power-sector contingent liabilities under Put-Call Option Agreements, N1.18 trillion associated with the Bank of Industry and N805 billion relating to the Lekki Deep Sea Port.
Power-sector obligations and guarantees remain an area to watch, particularly given the financial challenges across the electricity value chain.
350bps rate reset offers breathing room
The Central Bank of Nigeria’s 350-basis-point rate reset could provide some relief on the cost of domestic debt, although it does not reduce the existing N166.79 trillion debt stock.
The eventual fiscal benefit will depend on the extent to which monetary-policy easing is transmitted into FGN bond and Treasury-bill yields, as well as the government’s refinancing requirements.
Lower yields could gradually ease debt-service costs, but the gains could be diluted by continued fiscal borrowing, weak revenue mobilisation or renewed exchange-rate pressures.
A large domestic debt stock also means that elevated interest rates can quickly increase government financing costs, while aggressive government borrowing could compete with the private sector for domestic liquidity.
