Photo: Mr Wale Edun, Nigeria’s FInance Minister
By Douglas Maha, with agency reports
Nigeria’s public debt stock reached ₦149.39 trillion ($97.4 billion) by the end of Q1 2025, marking a 22.8 per cent increase over the preceding year as currency depreciation and persistent fiscal deficits continue to challenge Africa’s largest economy.
According to new data from the Debt Management Office, the federal government’s debt position grew by ₦27.72 trillion from ₦121.67 trillion in March 2024, while quarter-on-quarter figures showed a 3.3 per cent rise from ₦144.67 trillion at the close of 2024.
The expansion of Nigeria’s public debt reflects a mix of new borrowing and sharp naira depreciation, which has significantly inflated the local currency value of Nigeria’s external liabilities. At the centre of the rise is a deteriorating exchange rate regime that has pushed the naira further into weakness, increasing the cost of foreign debt servicing and squeezing public finances.
External debt stood at ₦70.63 trillion ($45.98 billion) as of March 2025, up from ₦56.02 trillion ($42.12 billion) a year earlier. While the dollar value rose by just $3.86 billion, the corresponding naira increase of ₦14.61 trillion—26.1 per cent—points to the material impact of currency volatility on sovereign liabilities. Analysts estimate the effective exchange rate applied by the DMO for Q1 2025 exceeded ₦1,530 to the dollar, compared to ₦1,330 a year earlier.
The federal government’s reliance on eurobonds, multilateral loans and bilateral arrangements has intensified in recent years, reflecting narrowing fiscal options amid sluggish tax revenue and constrained domestic liquidity. Servicing obligations in hard currency have become more onerous, further compounded by a sharp decline in foreign reserves and a widening balance-of-payments deficit.
Meanwhile, domestic debt rose to ₦78.76 trillion ($51.26 billion), a 20 per cent increase from ₦65.65 trillion in Q1 2024. Within that figure, the federal government accounts for ₦74.89 trillion, while state and local governments jointly hold ₦3.87 trillion, down from ₦4.07 trillion a year earlier. The marginal decline at the subnational level is attributed to higher monthly disbursements from the Federation Account, buoyed by oil revenue and recent tax collection reforms.
Nigeria’s debt structure is now evenly split, with domestic debt comprising 52.7 per cent and external obligations at 47.3 per cent. This is a notable shift from the prior year, when domestic debt represented a more dominant 54 per cent share. The rise in external borrowing—when viewed in local currency terms—highlights the sovereign’s growing exposure to foreign exchange risk.
With the debt-to-GDP ratio estimated at just above 50 per cent, Nigeria remains below international solvency thresholds, but its debt service-to-revenue ratio, which surpassed 90 per cent in 2024, is among the highest globally. The government is projected to spend over ₦18 trillion on debt servicing in 2025, representing close to 40 per cent of the proposed federal budget.
President Bola Tinubu’s administration has pledged to stabilise the exchange rate, broaden the tax base, and reduce dependence on borrowings to fund the fiscal deficit. But investor confidence remains fragile amid elevated inflation, continued capital outflows, and political resistance to structural reforms.
The Debt Management Office has reiterated its commitment to a sustainable debt strategy that favours concessional financing and local capital market development. However, the prevailing macroeconomic conditions—rising yields on government bonds, persistent inflation, and weak private investment—raise questions over the long-term efficacy of that approach.
Nigeria’s widening debt profile underscores a deeper structural dilemma: a resource-rich economy unable to translate its potential into revenue, trapped between fiscal ambition and monetary fragility. Without decisive reforms to anchor macroeconomic stability and restore currency credibility, the cost of borrowing may continue to outpace the country’s capacity to repay.
