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| Nigeria’s debt climbs sharply to record highs. |
Key figures (Q1 2025): Total public debt = ₦149.39 tn
Change from Q1 2024: +₦27.72 tn (+22.8%)
Change from Q4 2024: +₦4.72 tn (+3.3%)
External debt: ₦70.63 tn (47.3% of total) at end-Q1 2025
Domestic debt: ₦78.76 tn (52.7% of total) at end-Q1 2025
Federal Government (domestic): ₦74.89 tn; States + FCT: ₦3.87 tn (as of March 2025)
Drivers of the Debt Surge
The DMO and analysts point to two main drivers of the debt jump: fresh government borrowing and naira depreciation. The federal government has taken on new loans to finance persistent budget shortfalls, including both domestic bonds and external credit lines. In addition, the naira has weakened sharply: for example, the Central Bank of Nigeria’s official rate was about ₦1,330 to $1 in Q1 2024, but a weaker naira was needed to translate the external loans into naira by Q1 2025. As a result, Nigeria’s external debt grew to ₦70.63 tn (about $45.98 bn) by end-March 2025, up 26.1% from ₦56.02 tn in March 2024. (In dollar terms the increase was only about $3.86 bn.) The impact of currency losses is clear: a debt that may be flat in USD will balloon in naira value as the exchange rate weakens. Analysts caution that continued exchange-rate volatility could further swell the local-currency debt burden.
Debt Composition: Domestic vs External
As of Q1 2025 the total debt of ₦149.39 tn consisted of approximately 52.7% domestic debt and 47.3% external debt. Domestically, Nigeria’s debt was ₦78.76 tn (about $51.3 bn), up 20% year-on-year from ₦65.65 tn. Federal Government securities – bonds, treasury bills, Sukuk, and similar instruments – make up nearly all of this domestic portion. The Federal Government alone accounted for ₦74.89 tn of domestic debt, with state and FCT debt at ₦3.87 tn. Notably, subnational debt actually declined slightly: from ₦4.07 tn in Q1 2024 and ₦3.97 tn in Q4 2024 to ₦3.87 tn in Q1 2025, suggesting that states borrowed less or repaid debt in this quarter.
External debt (47.3% share): ₦70.63 tn (≈$45.98 bn)
Domestic debt (52.7% share): ₦78.76 tn (≈$51.26 bn)
Domestic debt, FG portion: ₦74.89 tn
Domestic debt, States & FCT: ₦3.87 tn
Domestic debt instruments are not exposed to exchange risk but come with interest costs that crowd out borrowing by the private sector. Indeed, analysts warn that heavy government issuance of bonds and T-bills can “crowd out” corporate borrowers and put upward pressure on local interest rates. Meanwhile, about half of Nigeria’s debt is held abroad: external debt (in USD, euro, yen etc.) stood at $45.98 bn in March 2025. This includes loans from multilateral and bilateral partners and Eurobonds. As Nigeria’s currency weakened, the naira value of these obligations jumped – underscoring the currency risk in the debt profile.
Fiscal Impact and Debt Service Burden
The exploding debt has major implications for Nigeria’s budget and fiscal health. Debt servicing costs now consume a large share of government revenue. Fitch Ratings notes that Nigeria’s debt-to-GDP ratio will hover around 51% in 2025–2026, and with revenue at only about 13.3% of GDP, interest payments already strain the budget. In fact, Fitch projects Nigeria’s general government interest-to-revenue ratio will exceed 30%, and federal interest payments alone could reach nearly 50% of federal revenue.
Concretely, debt service spending has soared. Data from the Central Bank and DMO indicate Nigeria spent ₦13.12 trillion on debt service in 2024 (up 68% from 2023), surpassing the previous budget allocation. External debt service alone was about $5.47 bn from January 2024 through February 2025. Anticipating continued high costs, the 2025 federal budget earmarks ₦16.0 trillion for debt service. By comparison, the entire 2025 budget totals roughly ₦54.99 trillion, meaning nearly 30% of planned expenditures will go just to paying interest and principal on past borrowings. These numbers highlight how debt servicing has become a dominant fiscal commitment.
Fitch and others warn that weak revenue growth exacerbates the problem. Fitch notes that even modest public revenue (around 13% of GDP) leaves limited fiscal space, and that high debt service could crowd out development spending. Nigeria’s gross reserves have been drawn down to meet obligations, and continued borrowing to fill budget deficits risks creating a vicious cycle. For 2025, analysts point out that the government’s projected deficit is about ₦13.08 trillion (roughly 1.5% of GDP), to be financed largely by new borrowing on top of existing stock.
Expert Warnings and Sustainability Concerns
Economists and market analysts are sounding alarms about the debt trajectory. Nairametrics reports that financial experts fear Nigeria is sliding into a “debt trap” – borrowing new funds merely to service old debts. In recent commentary, analysts note that Nigeria’s public debt in naira terms has surged by over 1,000% in the past decade, driven mainly by currency collapse and chronic deficits. To illustrate, DMO/DMO data show naira debt jumped from about ₦12.6 trillion in 2015 to ₦144.7 trillion in 2024. In dollar terms the increase was far smaller (from $65.4 bn to $94.2 bn), implying that roughly 697% depreciation of the naira (from ~₦193/$ in 2015 to ₦1,535/$ in 2024) accounts for most of the growth.
Experts warn this inflation of debt by exchange losses will continue unless addressed. The head of research at a major investment firm notes: *“We are already in a debt trap, borrowing new funds to pay old debts. If the federal government doesn’t de-leverage soon, insolvency could be imminent.”* Indeed, Nigeria’s debt service spending – already double the 2023 level – is expected to rise sharply (a projected increase from ₦8 tn in 2024 to ₦16 tn in 2025). Analysts emphasize that without substantial new revenue (through taxes or diversifying exports) and restrained spending, debt will keep mounting unsustainably.
Rating Agency and International Perspective
On the positive side, international observers have noted Nigeria’s recent policy reforms. In April 2025, Fitch Ratings upgraded Nigeria’s long-term foreign-currency issuer rating from ‘B–’ to **‘B’ (stable outlook)**, citing improved policy credibility after subsidy removal and a more flexible exchange rate. However, even Fitch warns of lingering risks: limited revenue, high interest burdens, and an external account vulnerable to oil price swings. Fitch and JP Morgan have projected that sustained low oil prices could swing Nigeria’s current account into deficit, potentially sending the naira toward ₦1,700/$ or worse. Such a scenario would dramatically inflate the naira value of Nigeria’s remaining dollar debt.
In sum, while reforms have bolstered short-term confidence, many analysts see Nigeria’s debt level as highly precarious. An economy where debt-to-GDP is around 50–53% (among the highest in sub-Saharan Africa) and where nearly half of revenue is eaten up by interest leaves little room for error. Experts note that half of Nigeria’s revenue already goes to debt service, forcing the government to borrow simply to stay afloat. As one economist bluntly put it, Nigeria is “borrowing to service debt” and edging toward insolvency if corrective measures aren’t taken.
Outlook and Implications
Looking ahead, the debt stock is set to rise further. The Tinubu administration has proposed new borrowings in 2025–2026 (including an external $21.5 bn loan program) to plug shortfalls. On the fiscal front, Nigeria faces difficult trade-offs: it must finance crucial security and development needs while trying to grow revenues. Analysts urge that borrowed funds be directed to productive projects (infrastructure, agriculture, etc.) that can spur growth and generate future income, rather than for recurrent spending.
At the macro level, stabilizing the naira through foreign exchange reform and rebuilding foreign reserves will help blunt the “exchange rate inflation” of debt. Strengthening revenue mobilization (e.g. broadening the tax base) is also critical. Until then, the official debt figures – hitting nearly ₦150 trillion in Q1 2025 – serve as a stark reminder of Nigeria’s fiscal challenges. Commentators emphasize that this debt surge “is happening against a backdrop of persistent fiscal pressures”, and has put Nigeria on a knife-edge. The coming quarters will test whether the government can manage this debt load or risk a fiscal crisis.