Onome Amuge
Nigeria’s total public debt stock rose to N152.40 trillion as of June 30 2025, according to the latest figures released by the Debt Management Office (DMO). The figure represents an increase of N3.01 trillion from N149.39 trillion recorded at the end of March 2025, a rise of 2.01 per cent within three months. In dollar terms, the debt profile grew from $97.24 billion to $99.66 billion, a 2.49 per cent increase over the same period.
The new data highlight Nigeria’s growing reliance on borrowing to finance fiscal deficits, despite efforts by the federal government to widen its revenue base through non-oil taxation and foreign exchange reforms. The steady rise in borrowing has coincided with weaker real sector expansion, slow capital inflows, and high inflation, pointing to a constrained macroeconomic environment.
The composition of the debt also reveals both domestic and external vulnerabilities. External debt increased to $46.98 billion (N71.85 trillion) in June 2025, up from $45.98 billion (N70.63 trillion) in March. Multilateral lenders accounted for $23.19 billion, or 49.4 per cent, of the total external portfolio. The World Bank remained Nigeria’s single largest external creditor, with $18.04 billion in outstanding loans, mostly through the International Development Association. Other multilateral partners include the African Development Bank, the International Monetary Fund, and the Islamic Development Bank.
Bilateral loans totalled $6.20 billion, led by the Export-Import Bank of China with $4.91 billion, while smaller exposures were owed to France, Japan, India, and Germany. Commercial borrowings, mainly Eurobonds, stood at $17.32 billion, or 36.9 per cent of external debt. Nigeria also owed $268.9 million in syndicated facilities and commercial bank loans. The rising exposure to Eurobonds reflects a shift towards market-based debt instruments, which increases sensitivity to global interest-rate movements and investor sentiment.
On the domestic side, total debt rose to N80.55 trillion in June, up from N78.76 trillion in March, a 2.27 per cent increase. Federal Government bonds accounted for N60.65 trillion, representing 79.2 per cent of total domestic debt. This component includes N36.52 trillion in naira-denominated bonds, N22.72 trillion in securitised Ways and Means advances from the Central Bank of Nigeria, and N1.40 trillion in dollar bonds.
Other domestic instruments include Treasury bills of N12.76 trillion (16.7 per cent), Sukuk bonds worth N1.29 trillion, savings bonds of N91.53 billion, green bonds of ₦62.36 billion, and promissory notes amounting to N1.73 trillion. The securitisation of the central bank’s overdraft lending represents an attempt by the government to formalise its short-term borrowing and reduce monetary financing of deficits.
According to the DMO, the federal government accounted for N141.08 trillion, or 92.6 per cent of total public debt. This includes N64.49 trillion in external obligations and N76.59 trillion in domestic liabilities. Subnational governments, comprising the 36 states and the Federal Capital Territory, owed N11.32 trillion (7.4 per cent), of which $4.81 billion (N7.36 trillion) was external and N3.96 trillion was domestic.
The rise in the total debt stock reflects the fiscal pressures confronting the Tinubu administration. Efforts to expand non-oil revenues, rationalise subsidies, and stabilise the naira have not yet translated into significant fiscal space.
While the DMO maintains that Nigeria’s debt remains within sustainable limits when measured against GDP, analysts note that such comparisons obscure the more critical indicators of fiscal stress. Debt sustainability, they argue, depends less on GDP ratios and more on the country’s capacity to generate sufficient revenue to service obligations without undermining essential spending.
According to a new Debt Burden Index published by the Nigerian Economic Summit Group, Nigeria’s fiscal pressure reached its highest level on record between 2020 and 2023, peaking at 83.6 points. The index measures solvency, liquidity, and revenue adequacy to gauge debt vulnerability. The study found that debt service costs exceeded total government revenue during that period, indicating a level of fiscal exhaustion rarely seen since the 1980s.
The report identified four distinct phases in Nigeria’s debt evolution between 2006 and 2024. The first, termed the Post-Relief Compression phase (2006–2014), reflected the benefits of debt forgiveness and high oil receipts, with index values below 10 points. The second, the Debt Crisis Acceleration phase (2015–2019), corresponded with lower oil prices, currency devaluations, and increased domestic borrowing, pushing the index above 30 points.
The third, the Fiscal Exhaustion phase (2020–2023), was driven by pandemic-related borrowing, revenue collapse, and rising debt service costs, which surpassed 100 per cent of income. The most recent phase, labelled the Tentative Reversal (2024–2025), saw improvement to 70.9 points, helped by foreign exchange unification and the removal of fuel subsidies. Nonetheless, fiscal strain remains concerning, with debt service payments continuing to absorb a disproportionate share of public revenue.
Between January and August 2025, Nigeria spent $2.86 billion servicing external debt, slightly below $3.06 billion during the same period in 2024. External debt service represented 69.1 per cent of total foreign payments of $4.14 billion during the review period, according to the group’s analysis.
The NESG report described Nigeria’s debt architecture as structurally fragile, arguing that the composition of borrowing, especially the reliance on short-term, high-yield domestic instruments, creates liquidity pressures that constrain development spending. The group called for a shift towards asset-linked borrowing, improved transparency, and stronger coordination between federal and subnational debt management.
Economists also agreed that Nigeria’s growing debt represents both a financing necessity and a potential drag on growth. They warned that debt accumulation in an environment of low productivity and high inflation could undermine macroeconomic stability.
Chioma Ude, senior economist at an Abuja-based consultancy, observed that Nigeria’s fiscal policy is trapped between the need to stabilise the currency and the pressure to stimulate growth. “The government has to borrow to fund its programmes, but excessive reliance on debt in a high-yield environment also raises the cost of capital across the economy. Private firms are squeezed because government paper competes directly with corporate credit,” she said.
Fitch Ratings, in its latest review, affirmed Nigeria’s sovereign credit rating at B with a stable outlook but cautioned that persistent deficits and growing debt service burdens remain constraints on fiscal flexibility. The agency noted that while reforms such as subsidy removal and FX liberalisation have improved the outlook for external liquidity, sustained revenue growth is essential to prevent further deterioration.
The impact of Nigeria’s debt accumulation extends beyond fiscal indicators. Rising debt obligations have macroeconomic implications for inflation, exchange rates, and monetary policy. The Central Bank of Nigeria has tightened liquidity conditions to contain inflation, but the high level of government borrowing keeps yields elevated, complicating efforts to lower interest rates.
According to analysts, domestic investors, including banks and pension funds, hold significant portions of government securities, linking public debt dynamics directly to the financial system. Thus, a sudden repricing of bonds or a loss of confidence in government paper could transmit stress across the sector. Analysts also highlight exchange-rate risk, as external debt obligations denominated in foreign currency expose Nigeria to higher repayment costs when the naira weakens.
The federal government has attempted to manage these risks through debt restructuring and securitisation. The conversion of Ways and Means advances into long-term instruments was intended to enhance transparency and reduce pressure on short-term liquidity. However, this process has also expanded the nominal debt stock, reflecting the scale of earlier deficit financing through the central bank.
Nigeria’s fiscal authorities insist that debt accumulation is necessary to sustain growth and finance essential infrastructure. They argue that reforms in tax collection, digitalisation, and customs administration will gradually improve revenue. The DMO has stated that the debt-to-GDP ratio remains below 55 per cent, within the threshold recommended for developing economies.
However, many economists argue that GDP-based comparisons underestimate the severity of the problem. They contend that Nigeria’s low revenue-to-GDP ratio, estimated at less than 10 per cent, means that the country has far less capacity to service its debt than peers with similar GDP ratios.
The rising debt burden also constrains monetary policy. The central bank’s efforts to stabilise the naira through market-based exchange-rate reforms have improved transparency but increased the local currency cost of servicing foreign debt. Every depreciation amplifies naira-denominated obligations, widening the deficit and necessitating more borrowing.
The fiscal risks are further complicated by contingent liabilities from state-owned enterprises, particularly in the power and energy sectors. The federal government has issued guarantees for infrastructure and gas-supply contracts that could crystallise into public debt if counterparties default. Analysts estimate that such contingent exposures could add as much as N10 trillion to the national balance sheet over time.
Despite these challenges, there are signs of notable progress. The government’s Medium-Term Fiscal Strategy aims to reduce deficit financing to below 3 per cent of GDP by 2027 and increase capital expenditure to 30 per cent of total spending. It also plans to diversify funding sources through public-private partnerships and asset recycling. However, execution risks remain high due to bureaucratic inertia, weak coordination across agencies, and limited investor confidence.
Analysts recommend a shift from debt-financed spending to productivity-driven growth. They suggest that future borrowing should be tied to measurable returns, such as toll-based road projects or power transmission upgrades. Fiscal discipline, they argue, must be complemented by institutional reforms that improve public financial management, enhance project evaluation, and strengthen the link between debt and growth.
The NESG report noted that Nigeria stands at a critical juncture in its fiscal affairs. It warned that without structural reforms to revenue mobilisation and expenditure control, the country risks entering a phase of chronic debt dependence. The report called for digital property taxation, improved value-added tax collection, and enforcement of mining royalties to expand fiscal capacity. It also urged the adoption of a “net-worth-based” debt management approach, in which new liabilities are matched by the creation of productive assets.
The group rejected austerity as a path to sustainability, advocating instead for what it called “strategic statecraft anchored in transparency, productivity, and fiscal justice.” The objective, it said, should be to align fiscal policy with long-term development rather than short-term survival.
