Nigeria’s public debt burden has surged to ₦152.4 trillion as of June 2025, according to data from the Debt Management Office (DMO), raising concerns over fiscal sustainability amid rising external obligations and ongoing budget pressures. Experts warn that while debt-financed growth remains a short-term lever, the long-term risks of high interest servicing, currency shocks, and crowding out development spending are real and urgent.
The scale of Nigeria’s debt was spotlighted in a recent analysis, which revealed that the country’s external debt alone stands at $46.98 billion (≈ ₦71.85 trillion). Regional and international creditors now account for a sizable portion of Nigeria’s debt obligations. Multilateral institutions, led by the World Bank, remain some of the largest lenders to Nigeria. Leadership magazine reported that, within the external debt pool, the World Bank’s exposure amounts to $18.04 billion, or nearly 38% of total external obligations. (Leadership News)
These debt dynamics come at a moment of serious fiscal risk. The IMF, speaking at the 2025 World Bank IMF Annual Meetings, cautioned Nigerian authorities about their rising borrowing costs and structural risks. According to IMF Managing Director Kristalina Georgieva, “very high levels of debt suffocate economies,” stressing the importance of improving non-oil revenue and rationalizing spending. (Vanguard News)
What’s Driving the Debt Surge
- Rapid Domestic Borrowing
Nigeria’s federal government has aggressively turned to the local market to fund its budget deficit, despite already elevated yields. According to Vanguard’s reporting on government spending, the federal government borrowed ₦10.85 trillion in the first four months of 2025 alone from domestic sources. (Vanguard News) This borrowing spree has raised red flags about the sustainability of Nigeria’s fiscal trajectory, particularly as debt service costs absorb a growing share of government revenue. - Rising External Obligations
Nigeria’s external debt climbed significantly in Q1 2025, reaching ₦70.63 trillion (US$45.97 billion) a 26% year-on-year increase, per DMO and Ecofin Agency data. (Ecofin Agency) Among this, a large portion is owed to multilateral lenders including the World Bank and IMF, raising concerns around repayment burdens and currency risk. - Debt Servicing Costs Increasing
The cost of servicing external debt is becoming heavier. According to DMO records reported by Voice of Naija, Nigeria spent $2.32 billion servicing World Bank and IMF loans in 2024, a dramatic increase compared to previous years. (VONa Communications) High debt service liabilities are limiting fiscal space for development projects and social spending.
Risks and Implications
- Crowding Out Development Spending
With so much of the budget dedicated to debt service, less money is available for infrastructure, health, education, and other growth-enhancing expenditures. The IMF has advised Nigeria to re-prioritize spending to avoid being trapped in a cycle of borrowing just to pay interest. - Currency Vulnerability
Given that a large portion of Nigeria’s external debt is denominated in foreign currency, any depreciation of the naira could dramatically increase the cost of repayment. This risk is amplified if external financing costs rise or global capital flows reverse. - Revenue Shortfalls
Nigeria’s dependence on volatile oil revenue and limited diversification makes its fiscal base fragile. If revenue under performs, debt sustainability could be challenged. Analysts emphasize that improving non-oil revenue through tax reform and better compliance is vital, a point echoed by the IMF. (Nigeria News Today) - High Interest Rate Environment
Local borrowing has been made easier by strained fiscal conditions, but domestic interest rates remain elevated. This keeps the cost of capital high for the government, increasing debt service burdens.
Possible Pathways for Relief
- Revenue Mobilization: To sustainably manage the debt, Nigeria must boost its non-oil revenue base via tax reform, digital taxation, and efficiency in tax collection.
- Debt Restructuring: Negotiating concessional terms, long maturities, or even swaps with multilateral lenders could ease short-term pressure.
- Fiscal Reforms: A more disciplined fiscal policy focusing on spending efficiency, cutting waste, and prioritizing growth-oriented expenditure is critical.
- Structural Reforms: Diversifying the economy further, particularly into agriculture, manufacturing and services, can expand the revenue base and reduce dependence on debt.
What This Means for Stakeholders
- For Investors: The debt dynamics in Nigeria present both risk and opportunity. Higher borrowing could signal future growth if well deployed, but risks around currency, policy and servicing remain very real.
- For Policymakers: The challenge is balancing growth with sustainability. The government must not rely on debt as a perpetual funding mechanism but should channel borrowings into productive investments.
- For Citizens: Rising debt service might crowd out spending on public services. However, if the money borrowed is invested wisely (in infrastructure, education, healthcare), it could ultimately benefit the broader population.
Nigeria’s public debt load now at ₦152.4 trillion underscores the high-stakes gamble the country is taking. While borrowing has enabled critical investments and bridged fiscal gaps, the current trajectory is raising alarms among multilateral institutions like the IMF. For Nigeria to avoid a debt trap, it needs stronger revenue growth, disciplined spending, and a clear strategy to deploy borrowed funds into long-term, high-impact projects. The road ahead is challenging, but the cost of inaction may be far greater.
