Monetary consultants are elevating considerations that Nigeria might be coming into a full-blown debt entice, the place the federal government is compelled to tackle new loans simply to service present obligations.
There are additionally rising fears of sovereign default, the likelihood that Nigeria may wrestle to satisfy its debt obligations.
Nigeria’s fiscal place has deteriorated considerably over the previous decade, with public debt rising by greater than 1,000% in naira phrases, pushed largely by foreign money devaluation and chronic fiscal deficits.
The naira worth of public debt soared from N12.6 trillion in 2015 to N144.7 trillion in 2024, marking a 1,048% improve, based on information from the Debt Administration Workplace (DMO) analyzed by Nairametrics Analysis.
In greenback phrases, Nigeria’s debt elevated by a extra modest 44% over the identical interval, from $65.43 billion in 2015 to $94.23 billion in 2024.
Nonetheless, the true value of that debt to the Nigerian economic system has been considerably inflated by the sharp 697% depreciation of the naira, which fell from N192.63/$ to N1,535.32/$ throughout the interval.
This foreign money depreciation means Nigeria now spends considerably extra in native foreign money to service overseas debt, even when the precise greenback obligations stay unchanged. Home debt additionally contributes closely to the burden, together with borrowings by way of FGN bonds, financial savings bonds, and treasury payments.
The general public debt trajectory is already rising in 2025, with President Bola Tinubu requesting Senate approval for a brand new $21.5 billion exterior borrowing plan as a part of the 2025–2026 borrowing technique. As well as, the President is searching for a ¥15 billion Japanese mortgage and a €51 million grant, indicating continued reliance on exterior financing.
Professional commentary on Nigeria’s public debt
Vice Chairman at Highcap Securities, David Adonri,
“FGN’s public debt has continued to skyrocket. In simply two years of this administration, the debt has doubled what the earlier administration collected in eight years,” says Adonri.
“Whereas the naira-denominated debt could also be lined with Methods and Means (central bank financing) on the threat of hyperinflation, escalating overseas debt should be extinguished with onerous foreign money, which will not be obtainable when wanted. That’s the actual risk; a sovereign default may happen if this tempo of overseas borrowing continues unchecked. We’re already in a debt entice, borrowing new funds to pay previous money owed. If the federal authorities doesn’t de-leverage quickly, insolvency might be imminent.”
Head of Analysis at Afrinvest, Damilare Asimiyu,
“The present administration has improved income considerably. Gross income rose to N34 trillion in 2024, however solely N9.44 trillion was retained for the federal price range, whereas the remainder went to states and revenue-generating businesses,” Asimiyu explains.
“Nonetheless, spending is rising sooner. The FG spent round N25 trillion in 2024, resulting in a deficit of N15.6 trillion. DMO information exhibits FG borrowed N46 trillion in 2024 alone, elevating its debt to N133 trillion. The nationwide debt hit N144 trillion.”
“The change price collapse has magnified our debt profile. With the naira falling from N187/$ in 2014 to N1,550/$ in 2024, the naira value of every greenback of debt has multiplied greater than 15-fold. Though USD debt varieties simply 38% of our whole debt, it’s the most risky portion.”
“We have to borrow responsibly for infrastructure and progress initiatives, not simply to cowl consumption/recurrent spending or repay present debt. In any other case, the longer term is in jeopardy if borrowing continues at this tempo and income progress stays depressed.”
Chief Compliance & Danger Officer at Zigma-Alpha Asset Administration, Ayegbeni Kanabe
“Debt is just not inherently dangerous, nevertheless it should be tied to financial initiatives with clear affect and clear reimbursement plans,” says Kanabe.
“The problem is just not debt alone, it’s misapplied or poorly utilized loans. If loans are used effectively and focused at initiatives that drive productiveness, reimbursement turns into manageable.”
“The federal government should additionally talk the financial significance of debt-financed initiatives to the general public. Residents have to know the way the debt improves their lives, and never simply see figures rising yearly with out seen growth.”
Key components which have contributed to Nigeria’s rising public debt
1. Change price devaluation
Probably the most important drivers of Nigeria’s public debt, particularly in naira phrases, is the sharp depreciation of the naira.
The change price fell from N192.63/$ in 2015 to N1,535.32/$ in 2024, a 697% devaluation. In consequence, even when exterior debt stays flat in greenback phrases, its naira worth explodes, making debt servicing dearer.
2. Persistent price range deficits
Nigeria has constantly spent greater than it earns, particularly because of heavy recurrent expenditure.
These deficits are financed by borrowing; the 2025 price range carries a major projected deficit of N13.39 trillion, to be financed by way of borrowing.
3. Low income mobilization
Though gross income has grown, the income was N34 trillion in 2024, based on the CBN statistical bulletin, however the federal authorities retained solely N9.44 trillion for the price range.
Weak tax assortment and over-reliance on oil income have undermined the flexibility to fund budgets with out debt.
4. Escalating debt servicing prices
As debt grows, so do debt servicing obligations. Debt service will increase from N8 trillion in 2024 to a projected N16 trillion in 2025. Servicing each native and exterior debt now consumes a major share of the nationwide price range.
5. Over-reliance on exterior borrowing
About 48.59% of Nigeria’s whole debt is exterior, primarily in USD and different onerous currencies.
Overseas borrowing has grown beneath successive administrations, typically for price range assist, infrastructure, or venture finance.
This makes Nigeria susceptible to world rate of interest hikes and change price actions.
Outlook
With out pressing reforms, Nigeria’s public debt is anticipated to proceed rising in 2025.
Already, the president has requested the Senate to approve a brand new $21.5 billion exterior borrowing plan. Key suggestions embrace:
- Bettering income technology, particularly by way of taxation and export diversification;
- Lowering price range deficits by reducing non-essential spending;
- Avoiding debt for recurrent expenditure;
- And most significantly, guaranteeing that debt is tied to productive investments.
If these steps usually are not taken, Nigeria might face a debt disaster that undermines macroeconomic stability, investor confidence, and the flexibility to fund important public companies.
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