Seemingly unstoppable, Nigeria is on a fast lane to a fiscal precipice, as its total public debt hit $100 billion as of end-June 2025, according to a report by the Debt Management Office (DMO). The DMO’s report shows that Nigeria’s total public debt rose to N152.4 trillion as of June 30, 2025, representing a N3.01 trillion (2.01 %) increase from the previous quarter level of N149.39 trillion.
In dollar terms, the report shows that the debt stock rose to $99.66 billion, up 2.49 percent from $97.24 billion in the previous quarter ended March 30, 2025. The DMO also noted a 13.47 percent year-on-year increase, underscoring the federal government’s heavy reliance on borrowing to finance fiscal deficits, weak revenue growth and mounting expenditure pressures.
The DMO report shows that multilateral lenders remain the largest creditors, with a combined exposure of $23.19 billion, accounting for 49.4 percent of external obligations. The World Bank, through the International Development Association (IDA), is the single largest creditor with $18.04 billion outstanding.
Bilateral loans made up of $6.20 billion, led by the Export-Import Bank of China at $4.91 billion, followed by smaller exposure to France, Japan, India, and Germany. Commercial borrowings remained sizeable at $17.32 billion, almost entirely Eurobonds, which account for 36.9 percent of the external portfolio. A further $268.9 million was owed under syndicated facilities and commercial bank loans.
Overall, Nigeria’s rising public debt and narrowing fiscal space have increased concerns around the long-term sustainability of government borrowing. While conventional metrics such as debt-to-GDP ratio remain a reference point, they often obscure the underlying fiscal strain being experienced by countries like Nigeria, with a structurally weak revenue base and rising debt service costs.
In response to this peculiar challenge, the Nigerian Economic Summit Group (NESG), introduced the Debt Burden Index (DBI) — a more policy-responsive and multidimensional tool designed to track Nigeria’s debt stress over time. According to the NESG report, the DBI captures both the scale of debt and the economy’s capacity to manage it, offering a composite view of fiscal pressure that is better aligned with Nigeria’s evolving debt dynamics.
The DBI is constructed using five (5) internationally recognised debt indicators endorsed by the IMF and World Bank: domestic debt-to-GDP, external debt-to-GDP, external debt-to-exports, debt service-to-exports, and debt service-to-revenue. These indicators were normalised using a Fixed Reference Min-Max scaling technique, with 2007 selected as the base year to reflect the point at which these indicators were at their lowest after the Paris Club debt relief in 2005.
Each component reflects a dimension of fiscal stress, and weights are assigned based on Nigeria’s debt structure. Most notably, the debt service-to-revenue ratio carries 40 percent weight, given its direct link to liquidity pressures. The DBI thus provides a continuous, transparent, and easily interpretable measure of Nigeria’s debt burden.
The NESG’s findings show that from 2006 to 2024, Nigeria’s DBI followed a four-phase trajectory reflecting shifting macroeconomic realities and fiscal responses. The Post-Relief Compression (2006—2014) period saw low DBI levels, averaging below 10 index points, thanks to the 2005 debt relief and strong oil revenues, though institutional reforms lagged.
According to the NESG, the Debt Crisis Acceleration (2015—2019) phase marked a sharp rise in debt stress, as oil shocks, rising domestic borrowing, and weak revenue mobilisation pushed the DBI above 30 index points. Between 2020 and 2023, the Fiscal Exhaustion phase emerged, with the DBI peaking at 83.6 index points due to COVI-19-induced borrowing, revenue collapse, and debt service consuming over 100 percent of revenue.
In 2024, the NESG said, a Tentative Reversal occurred, with the DBI easing to 70.9 index points (estimated 69.0 points in Q1-2025), aided by fuel subsidy removal and FX reforms; however, fiscal pressures remain acute. Overall, the DBI proves more effective than debt-to-GDP ratio in capturing Nigeria’s true debt stress by integrating solvency, liquidity, and revenue capacity into a single composite metric.
The DBI also provides a framework for actionable policy insights. First, it underscores the need for borrowing discipline, emphasising that future debt must be linked to productive, growth-inducing projects with measurable returns. Second, it reaffirms the urgency of domestic revenue reforms, including VAT efficiency, mining royalties, and digitalised property taxation.
Third, the NESG’s report advocates for stronger private sector mobilisation through diversified instruments, such as equity-based infrastructure financing, Public-Private Partnership (PPP), and crowd-sourced investment in public goods. Fourth, it encourages a national shift toward net worth-based debt management, ensuring that any increase in liabilities is offset by an equal or greater increase in national assets.
Lastly, the report calls for deep institutional reforms to improve debt transparency, coordinate subnational borrowing, and enforce rules-based fiscal governance. Unfortunately, these are the substrata lacking in Nigeria’s subsisting public finance and fiscal policy management
Nigeria’s debt portfolio continues to remain highly vulnerable to currency depreciation engendered by monetary and fiscal policy reforms. As it is, even in periods where fresh borrowing is limited, the conversion of dollar and other foreign currency debts at weaker naira levels definitely inflates the total debt.
Arguably, too, the ‘massive presence’ of the federal government in the local debt market (via bonds and other instruments) has crowded out not a few deficit spending units (DSUs) in the financial market. For the government also, debt service obligations in recent times have continued to crowd out investments in critical infrastructure and social spending.
The other leg of this argument is the continued expansion of the huge void in the sphere of Public-Private-Partnership (PPP): either because of lack of trust in the government or inadequacy of incentives to private sector operators. Rather than going for outright borrowing for infrastructure financing, well-structured PPP deals could be veritable alternatives available to the government; thereby minimising debt overhang.
Nigeria has really gone through a tortuous path in its public debt management, and must do all that is necessary to avoid the blind alley the second time. At a critical moment in 2005, the Paris Club of creditors wrote off $18 billion out of the $30 billion owed by Nigeria.
No doubt, the debt relief deal was a significant milestone for Nigeria, allowing the country to redirect resources towards development projects and economic growth at that time. This time around, the powers that be must pull the country back from the precipice, as her public debt hits $100 billion — even as the borrowing spree continues!
Marcel Okeke, a practising economist and consultant in Business Strategy & Sustainability based in Lagos, is a former Chief Economist at Zenith Bank Plc. He can be reached at: obioraokeke2000@yahoo.com; +2348033075697
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