Nigeria is gearing up to settle two substantial debt commitments before 2025 concludes: a $1.12 billion Eurobond and a N100 billion Islamic bond, testing the nation’s ability to handle mounting repayment demands amid strained public finances.
The Eurobond, carrying a 7.625% coupon and originally launched in November 2018, is set to mature on November 21, 2025. It was part of efforts to finance critical infrastructure and strengthen external reserves, attracting robust demand from global investors even in a turbulent market environment.
The Sukuk, issued at 15.743% via the FGN Roads Sukuk Company 1 Plc and due on December 28, 2025, raised N100 billion (approximately $68.5 million at current rates) specifically for highway development. This instrument underscores the government’s push to broaden funding avenues through Sharia-compliant financing.
At an exchange rate of around N1,465 to the dollar, the combined obligations exceed N1.7 trillion in naira terms, amplifying pressure on budgetary resources as debt servicing costs escalate.
Heavy External Servicing Led by IMF and Eurobonds
Debt Management Office (DMO) figures reveal that Nigeria disbursed more than $2.32 billion (roughly N3.4 trillion) on foreign debt obligations from January to June 2025. The IMF and Eurobond creditors together claimed about 65% of this total, or $1.5 billion (N2.197 trillion).
The IMF received the largest share at $816.3 million (N1.195 trillion), equating to 35.2% of external outflows and highlighting reliance on its programs with rigid terms. Eurobonds followed, taking $687.8 million (N1.007 trillion) or 29.6%, illustrating the premium pricing of market-based debt.
Multilateral institutions offered softer terms: the World Bank’s IDA arm got $346.8 million (N508.1 billion), and the African Development Bank $116.9 million (N171.3 billion), jointly covering 20%. Bilateral loans to Chinese entities, including EXIM Bank and China Development Bank, amounted to $235.6 million (N345.15 billion)—under 11%—down from prior dominance due to maturing older facilities and a pivot toward multilateral and commercial sources.
Experts note that reduced Chinese lending could hinder infrastructure progress in sectors like transport and power, potentially pushing the country toward costlier alternatives from the IMF or bond markets.
Domestic Debt Adds to Fiscal Strain
Local repayments intensified in the second quarter, with N1.7 trillion allocated from April to June. FGN Bonds dominated at N1.07 trillion (about two-thirds), followed by Treasury Bills at N537.9 billion (31%). Sukuk, promissory notes, green bonds, and savings bonds together absorbed under N95 billion, indicating limited variety in the internal portfolio.
Overall, total debt servicing—domestic and external—reached N5.7 trillion in the first six months, nearing half of anticipated annual revenues and squeezing allocations for essential services like roads, schools, and hospitals.
Expert Calls for Strategic Reforms
Akin Olaniyan, head of Chatterhouse Limited, described the scenario as akin to a household devoting 70-90% of earnings to loan repayments, leaving scant flexibility. He advocated tying new debt to revenue-generating projects, exploring restructurings, and boosting non-oil income through asset sales, while avoiding reserve drawdowns except in extremes.
Investment specialist Tajudeen Olayinka emphasized improving export revenues to ease forex-denominated risks and enhancing central bank policy effectiveness to curb inflation and rates. He pointed to recent reserve gains from prior bond issuances as a short-term buffer but stressed the need for better monetary tools, as evidenced by the apex bank’s tighter grip on bond markets.
Analysts concur that sustainable relief demands diversified earnings, prudent lending, policy coherence, and greater private-sector involvement to avert escalating vulnerabilities.
