{Financial} consultants are elevating considerations that Nigeria could possibly be coming into a full-blown debt lure, the place the federal government is compelled to tackle new loans simply to service current obligations.
There are additionally rising fears of sovereign default, the chance that Nigeria may battle to satisfy its debt obligations.
Nigeria’s fiscal place has deteriorated considerably over the previous decade, with public debt rising by greater than 1,000% in naira phrases, pushed largely by forex devaluation and chronic fiscal deficits.
The naira worth of public debt soared from N12.6 trillion in 2015 to N144.7 trillion in 2024, marking a 1,048% improve, in response to information from the Debt Administration Workplace (DMO) analyzed by Nairametrics Analysis.
In greenback phrases, Nigeria’s debt elevated by a extra modest 44% over the identical interval, from $65.43 billion in 2015 to $94.23 billion in 2024.
Nonetheless, the true value of that debt to the Nigerian economic system has been considerably inflated by the sharp 697% depreciation of the naira, which fell from N192.63/$ to N1,535.32/$ throughout the interval.
This forex depreciation means Nigeria now spends considerably extra in native forex to service international debt, even when the precise greenback obligations stay unchanged. Home debt additionally contributes closely to the burden, together with borrowings by FGN bonds, financial savings bonds, and treasury payments.
The general public debt trajectory is already rising in 2025, with President Bola Tinubu requesting Senate approval for a brand new $21.5 billion exterior borrowing plan as a part of the 2025–2026 borrowing technique. As well as, the President is in search of a ¥15 billion Japanese mortgage and a €51 million grant, indicating continued reliance on exterior financing.
Vice Chairman at Highcap Securities, David Adonri,
“FGN’s public debt has continued to skyrocket. In simply two years of this administration, the debt has doubled what the earlier administration collected in eight years,” says Adonri.
“Whereas the naira-denominated debt could also be lined with Methods and Means (central {bank} financing) on the threat of hyperinflation, escalating international debt have to be extinguished with exhausting forex, which will not be accessible when wanted. That’s the actual risk; a sovereign default may happen if this tempo of international borrowing continues unchecked. We’re already in a debt lure, borrowing new funds to pay outdated money owed. If the federal authorities doesn’t de-leverage quickly, insolvency could possibly be imminent.”
Head of Analysis at Afrinvest, Damilare Asimiyu,
“The present administration has improved income considerably. Gross income rose to N34 trillion in 2024, however solely N9.44 trillion was retained for the federal funds, whereas the remainder went to states and revenue-generating businesses,” Asimiyu explains.
“Nonetheless, spending is rising quicker. The FG spent round N25 trillion in 2024, resulting in a deficit of N15.6 trillion. DMO information exhibits FG borrowed N46 trillion in 2024 alone, elevating its debt to N133 trillion. The nationwide debt hit N144 trillion.”
“The alternate charge collapse has magnified our debt profile. With the naira falling from N187/$ in 2014 to N1,550/$ in 2024, the naira value of every greenback of debt has multiplied greater than 15-fold. Though USD debt types simply 38% of our complete debt, it’s the most risky portion.”
“We have to borrow responsibly for infrastructure and development initiatives, not simply to cowl consumption/recurrent spending or repay current debt. In any other case, the long run is in jeopardy if borrowing continues at this tempo and income development stays depressed.”
Chief Compliance & Threat Officer at Zigma-Alpha Asset Administration, Ayegbeni Kanabe
“Debt is just not inherently dangerous, however it have to be tied to {economic} initiatives with clear influence and clear compensation plans,” says Kanabe.
“The difficulty is just not debt alone, it’s misapplied or poorly utilized loans. If loans are used effectively and focused at initiatives that drive productiveness, compensation turns into manageable.”
“The federal government should additionally talk the {economic} significance of debt-financed initiatives to the general public. Residents have to understand how the debt improves their lives, and never simply see figures rising yearly with out seen improvement.”
One of the vital drivers of Nigeria’s public debt, particularly in naira phrases, is the sharp depreciation of the naira.
The alternate charge fell from N192.63/$ in 2015 to N1,535.32/$ in 2024, a 697% devaluation. In consequence, even when exterior debt stays flat in greenback phrases, its naira worth explodes, making debt servicing costlier.
Nigeria has persistently spent greater than it earns, particularly resulting from heavy recurrent expenditure.
These deficits are financed by borrowing; the 2025 funds carries a major projected deficit of N13.39 trillion, to be financed by borrowing.
Though gross income has grown, the income was N34 trillion in 2024, in response to the CBN statistical bulletin, however the federal authorities retained solely N9.44 trillion for the funds.
Weak tax assortment and over-reliance on oil income have undermined the flexibility to fund budgets with out debt.
About 48.59% of Nigeria’s complete debt is exterior, primarily in USD and different exhausting currencies.
About 48.59% of Nigeria’s complete debt is exterior, primarily in USD and different exhausting currencies.
Overseas borrowing has grown beneath successive administrations, typically for funds assist, infrastructure, or mission finance.
