Nigeria’s public debt stock is projected to reach an unprecedented N187.8 trillion by 2025, highlighting the mounting fiscal challenges facing Africa’s largest economy.
This comes as the country grapples with rising borrowing costs, a depreciating naira, and aggressive government debt accumulation, according to a report by investment firm Cardinalstone.
The report, titled “Pressure to Plateau,” reveals that the country’s debt stock is expected to climb from N153.04 trillion by the end of 2024 to N187.79 trillion in 2025.
The surge is driven by increased reliance on domestic and foreign borrowing, including the issuance of a $900 billion dollar-denominated domestic bond, regular sales of Nigerian Treasury Bills (NTBs) and bonds, and a return to the Eurobond market, where the country raised $2.2 billion.
Cardinalstone analysts warned that the sharp rise in government debt is exacerbating sustainability concerns. Nigeria’s debt has already ballooned from N49.85 trillion prior to the 2023 general elections to N134.3 trillion by mid-2024.
The Debt Management Office (DMO) data shows that as of Q2 2024, foreign debt stood at N63 trillion ($43 billion), accounting for 47% of the country’s total debt.
The Federal Government of Nigeria (FGN) borrowed N56 trillion externally, while the 36 states and the Federal Capital Territory (FCT) owed a combined N7 trillion.
Domestically, the government leaned even more heavily on borrowing, with the FGN holding N66 trillion and state governments adding another N4 trillion. Domestic debt now accounts for 53% of the country’s total debt portfolio.
Nigeria’s public debt stock, which has surged from 53% of GDP in Q1 to 58% in Q2, has breached the DMO’s self-imposed 40% debt ceiling outlined in its Medium-Term Debt Management Strategy.
While still below the International Monetary Fund’s (IMF) 60% debt-to-GDP benchmark for emerging markets, analysts warn that Nigeria’s weak revenue profile and foreign exchange volatility could further exacerbate its debt burden.
Debt servicing costs have skyrocketed, compounding the strain on government finances. Between January and June 2024, debt service costs surged by 69% year-on-year to N6 trillion, consuming 50% of the federal government’s aggregate expenditure.
The debt-service-to-revenue ratio has soared to 162%, up from 128% in the same period last year.
Analysts have expressed fears that the rising debt levels could push Nigeria toward a debt crisis. The country’s worst cost-of-living crisis in decades further complicates the situation, with fiscal resources increasingly diverted to service debts rather than fund critical capital expenditures.
Nigeria faces significant debt obligations in the coming years. Beyond 2026, the country will need to manage Eurobond maturities averaging $1.33 billion annually over the next decade, with total annual servicing costs (including coupon payments) estimated at $2.24 billion.
Despite these challenges, the Cardinalstone report noted that Nigeria’s external debt-linked ratios, such as external debt service as a percentage of exports and debt service to exports, remain within IMF’s thresholds.
The increasing debt burden highlights Nigeria’s pressing need for structural reforms to enhance revenue generation, stabilize the naira, and curb its borrowing appetite.
Failure to address these issues could deepen fiscal vulnerabilities, potentially destabilizing the economy further.
