Nigeria’s total public debt climbed to N149.39 trillion by March 31, 2025, reflecting a 22.8% year-on-year increase from N121.67 trillion in Q1 2024, according to the Debt Management Office (DMO). The debt stock also grew by 3.3% quarter-on-quarter, rising by N4.72 trillion from N144.67 trillion at the end of December 2024. The steady rise is attributed to new borrowings and the impact of naira depreciation on external debt obligations.
External Debt Rises Amid Currency Depreciation
Nigeria’s external debt reached N70.63 trillion ($45.98 billion) in Q1 2025, up 26.1% from N56.02 trillion ($42.12 billion) in Q1 2024. On a quarterly basis, it saw a modest 0.5% increase from N70.29 trillion in Q4 2024. The significant year-on-year jump in naira terms is largely due to the naira’s depreciation, which amplifies the cost of servicing dollar- and euro-denominated loans. The Central Bank of Nigeria (CBN) used an exchange rate of N1,330.26 per US dollar for Q1 2024 conversions, but the 2025 rate, though undisclosed, likely reflects further currency weakening.
External debt includes loans from multilateral institutions like the World Bank and African Development Bank, bilateral creditors, and commercial sources such as Eurobonds. The growing naira-denominated burden of these loans highlights Nigeria’s vulnerability to exchange rate fluctuations, raising concerns about repayment sustainability without robust currency stabilization measures.
Domestic Debt Approaches N79 Trillion
Domestic debt increased to N78.76 trillion ($51.26 billion) by March 2025, a 20% rise from N65.65 trillion ($49.35 billion) in Q1 2024 and a 5.9% increase from N74.38 trillion in Q4 2024. The federal government accounted for N74.89 trillion, while the 36 states and Federal Capital Territory (FCT) contributed N3.87 trillion. Notably, state-level debt slightly declined from N3.97 trillion in Q4 2024 and N4.07 trillion in Q1 2024, reflecting improved repayment efforts supported by higher Federation Account Allocation Committee (FAAC) revenues.
Domestic borrowing primarily comprises government securities like Treasury Bills, FGN Bonds, Sukuk, and Green Bonds, used to finance the national budget deficit. While these instruments are insulated from exchange rate risks, their rising interest costs strain public finances and risk crowding out private sector investment.
Debt Composition and Fiscal Concerns
In Q1 2025, domestic debt accounted for 52.7% of the total debt stock, with external debt comprising 47.3%, a slight shift from Q1 2024’s 54% domestic and 46% external split. The increasing share of external debt in naira terms underscores the challenges posed by currency depreciation. Meanwhile, the growth in domestic debt reflects heavy reliance on local capital markets, raising concerns about high debt servicing costs, which consume a significant portion of Nigeria’s budget.
Economic Implications
The rapid rise in public debt, now nearing N150 trillion, has sparked warnings about fiscal sustainability. Experts highlight the risk of a debt trap, as debt servicing obligations continue to strain national revenues. The DMO’s recent bond auctions, including a N100 billion offering in June 2025, indicate strong investor demand but also underscore Nigeria’s dependence on borrowing to bridge fiscal gaps.
Analysts urge reforms to boost revenue generation, stabilize the naira, and reduce reliance on debt. Investments in non-oil sectors and infrastructure, alongside prudent fiscal management, are seen as critical to averting a potential sovereign default risk, especially given the 1,000% surge in public debt in naira terms over the past decade.
Looking Ahead
As Nigeria grapples with fiscal pressures, the government faces the challenge of balancing debt accumulation with economic growth. Strengthening domestic revenue streams, enhancing export diversification, and addressing currency volatility will be key to ensuring long-term fiscal stability. The DMO continues to monitor debt levels, but the trajectory raises critical questions about Nigeria’s economic resilience in the face of global and domestic challenges.
