Nigeria’s Mounting Debt: The Price Of Borrowed Stability In A Fragile Economy
By OBI DAVIES
NIGERIA’S debt clock is ticking faster than ever. With total public debt surging to ₦152.40 trillion as of June 2025—an 11.6% year-on-year increase—the country finds itself deeper in a fiscal hole, balancing precariously between reform ambitions and financial dependence.
The latest data from the Debt Management Office (DMO) paints a sobering picture: in just one year, Nigeria’s debt grew by almost ₦16 trillion, up from ₦136.51 trillion in June 2024. In dollar terms, that’s a jump from $89.15 billion to $99.66 billion, underscoring how borrowing remains the government’s preferred answer to widening budget deficits, weak revenue, and sluggish growth.
The Anatomy of Nigeria’s Debt
Of the ₦152.4 trillion total, the federal government shoulders 92.6%, amounting to ₦141.08 trillion, while the states and the FCT share the remainder. Nigeria’s debt mix reveals a dependence on both external credit (₦64.49 trillion) and domestic borrowing (₦76.59 trillion)—a dual strategy that keeps liquidity flowing but raises the country’s vulnerability to both global shocks and internal fiscal imbalances.
Externally, Nigeria owes $46.98 billion, up from $42.10 billion a year earlier. The World Bank remains the largest creditor, holding $18.04 billion—nearly 38% of all external debt. Together with other multilateral lenders such as the African Development Bank, IMF, and Islamic Development Bank, they account for nearly half of Nigeria’s offshore liabilities.
Bilateral lenders, led by the China Exim Bank with $4.91 billion, and commercial creditors—mostly through Eurobonds valued at $17.32 billion—complete the external debt landscape. These commercial borrowings, though vital for bridging funding gaps, leave Nigeria exposed to the whims of global capital markets, where rising interest rates and investor caution could raise refinancing risks.
Domestically, debt climbed to ₦80.55 trillion, driven largely by the government’s reliance on bonds and Treasury instruments to finance recurrent obligations. FGN bonds alone account for ₦60.65 trillion, or nearly four-fifths of the local portfolio. Notably, ₦22.72 trillion of that represents the securitised Ways and Means advances—a conversion of past central bank overdrafts into long-term debt, effectively formalising years of fiscal indiscipline.
The Weight of Borrowing
Behind these numbers lies a deeper story: Nigeria is spending more to service debt than it earns from critical revenue sources. With oil revenues underperforming and non-oil sectors still struggling to expand, debt servicing costs are swallowing a growing share of federal expenditure.
According to fiscal analysts, the problem isn’t merely the size of the debt—it’s the inefficiency of its use. Much of the borrowed money goes toward recurrent spending, not infrastructure or productive investment. The result is a cycle of borrowing to stay afloat, rather than borrowing to grow.
A History of Deferred Reform
The roots of this debt dependency stretch back decades, but it has accelerated in the past five years. From COVID-19’s economic fallout to currency volatility and subsidy removal, every new shock has deepened Nigeria’s borrowing appetite.
The Tinubu administration, which came into office promising fiscal discipline, inherited a strained balance sheet and a tangle of domestic obligations. The government’s attempts to unify exchange rates, curb inflation, and boost revenue through tax reforms are ongoing—but in the meantime, debt has become the bridge holding the economy together.
Yet experts warn that bridge is buckling. “The pace of borrowing is unsustainable without a corresponding rise in productive capacity,” says Lagos-based economist Dr. Nkem Okafor. “Nigeria risks mortgaging its future revenues just to manage today’s deficits.”
What’s at Stake
The DMO insists Nigeria’s debt remains within manageable limits, but the warning lights are flashing. The growing reliance on Eurobonds and CBN financing exposes the country to currency risk, while rising interest payments threaten to erode funds meant for social spending and infrastructure.
The federal government’s debt strategy—borrowing to stabilise reforms—may buy time, but without aggressive revenue mobilisation and expenditure control, it deepens structural vulnerabilities.
Ordinary Nigerians are already feeling the pinch. Inflation above 30%, a volatile naira, and high borrowing costs for businesses translate to reduced purchasing power and job insecurity. The macroeconomic numbers may be abstract, but their human cost is not.
The Road Ahead
Nigeria stands at a fiscal crossroads. To escape its debt trap, the country must shift from debt-funded survival to revenue-driven growth. That means widening the tax base, improving compliance, curbing corruption, and investing borrowed funds in sectors that create value—like energy, transport, and manufacturing.
Until then, the DMO’s quarterly debt updates will continue to tell the same story: a nation borrowing faster than it’s building, chasing stability in an economy running on credit.
