Nigeria: Growing Debt Burden and Fiscal Realities
In recent times, Nigeria’s fiscal reality is increasingly being defined by a widening gap between rising debt obligations and weak revenue generation. With the latest $516 million (N707 billion) loan request approved by the House of Representatives on April 28, 2026, to connect Lagos to Sokoto, public debt has now exceeded N159.3 trillion ($111 billion); no thanks to naira depreciation, and the formalisation of large central bank overdrafts into long-term liabilities. Yet, federal revenue has remained comparatively constrained at about N10 trillion to N15 trillion annually in recent years, leaving a persistent shortfall that has deepened reliance on borrowing to finance both recurrent and capital expenditure, to the extent that debt servicing has, in some fiscal periods, consumed as much as or even more than total government revenue, significantly limiting fiscal space for development spending. In this report, Sunday Ehigiator analyses the situation in detail.
In 2024, Nigeria’s fiscal position reached a point that economists typically associate with acute stress: the federal government spent virtually all revenue servicing debt. In some analytical estimates, it spent even more.
According to analysis by the Nigerian Economic Summit Group, debt servicing consumed over 100 per cent of federally retained revenue, with some calculations placing the ratio above 110 per cent depending on methodology. That means that for every N100 the federal government earned, at least N100 went into paying interest and repaying loans. In effect, not a single naira of revenue was left for capital expenditure or social services. That meant every naira spent on infrastructure, healthcare, education, or security had to come from borrowing. This reality now defines the fiscal debate under President Bola Ahmed Tinubu, whose administration has combined aggressive reforms with continued reliance on debt financing.
Nigeria’s Debt Size
According to Nigeria’s Debt Management Office (DMO), by December 31, 2025, Nigeria’s total public debt had risen to N159.28 trillion ($111 billion). In nominal terms, this represents an increase of roughly N70 trillion compared to the period around mid-2023.
However, the dollar value tells a different story. In external terms, Nigeria’s debt has remained relatively stable, fluctuating between $105 billion and $113 billion. This divergence between naira and dollar figures is one of the most important and most misunderstood aspects of the current debt conversation.
The reason lies in exchange rate depreciation. When the naira traded at around N460 to the dollar in early 2023, a $10 billion external debt stock translated to N4.6 trillion. By 2025, with the naira trading above N1,500 to the dollar, that same $10 billion would be valued at over N15 trillion. In other words, a significant portion of Nigeria’s apparent debt increase is not new borrowing, but the arithmetic effect of currency devaluation.
Revenue vs Debt Service
Nigeria’s most critical fiscal weakness over the past three years has been its inability to generate sufficient revenue relative to its debt obligations. In 2023, federally retained revenue was approximately N10 trillion to N11 trillion, while debt servicing costs were estimated at N8 trillion to N9 trillion. This placed the debt service-to-revenue ratio close to 80 to 90 per cent. By 2024, the situation worsened. Revenue rose modestly to roughly N12 trillion to N13 trillion, but debt servicing climbed faster, reaching about N13 trillion to N14 trillion. This pushed the ratio to around 100 per cent and, in some independent estimates, above 110 per cent.
In 2025, the imbalance persisted. Between January and July alone, federal revenue stood at N13.67 trillion, representing a 42.7 per cent shortfall from the target. Within the same period, debt servicing and personnel costs together exceeded N14 trillion, already surpassing total revenue before capital expenditure was even considered. Over these three years, the pattern is clear. Revenue growth has been slow and inconsistent, while debt servicing has risen steadily and, at times, aggressively. The result is a fiscal squeeze in which nearly all government earnings are absorbed by existing obligations. Nigeria’s revenue-to-GDP ratio remains below 10 per cent, according to the National Bureau of Statistics, compared to 15 to 25 per cent in many peer economies.
The Ways and Means
Another major driver of the debt surge is the securitisation of central bank overdrafts known as Ways and Means. Between 2015 and 2023, financing from the Central Bank of Nigeria under this facility grew from approximately N790 billion to about N26.95 trillion. This represents an increase of more than 2,900 per cent, far exceeding the statutory limit of 5 per cent of prior-year revenue. It must be noted that in late 2024, the National Assembly voted to increase this limit to 10 per cent, though the CBN has stated it will continue to aim for the 5 per cent cap in its current guidelines.
However, under Section 38 of the CBN Act 2007, these advances were strictly capped at 5 per cent of the previous year’s actual revenue. Hence, the N26.9 trillion total significantly exceeded this limit, sparking widespread concern over inflation and debt sustainability. In May 2023, the National Assembly approved the conversion of N22.7 trillion of this overdraft into a 40-year bond at an interest rate of about 9 per cent and a 3-year moratorium on principal repayment. Later in December of that same year, an additional N7.3 trillion was also securitised, bringing the total to nearly N30 trillion, as confirmed by DMO in early 2024.
Moving these figures to the official debt stock caused Nigeria’s total public debt to jump significantly, crossing N159 trillion by April 2026. The move also saved the government money on interest. Before securitisation, the CBN charged the Monetary Policy Rate (MPR) + 3 per cent (which would have been roughly 20.5 per cent –21 per cent in 2023); the 9 per cent bond rate significantly lowered the annual debt service burden. This means that roughly one-fifth of Nigeria’s total public debt today consists of previously accumulated central bank financing that has now been formalised as long-term obligations extending to 2063.
Revenue: Weakest Link in the Chain
Nigeria’s fiscal crisis is fundamentally a revenue crisis. According to the Budget Office of the Federation’s 2025 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), the federal government earned N13.67 trillion between January and July 2025. This was exactly a 42.7 per cent shortfall from the pro-rata target of N23.85 trillion. Combined spending on debt service (N9.81 trillion) and personnel costs (N4.51 trillion) totalled N14.32 trillion for the same seven-month period. This amounted to approximately 105 per cent of the government’s total earned revenue. This means that even before considering capital expenditure, the government had already spent more than it earned. Also, the National Bureau of Statistics and international reports from the Organisation for Economic Co-operation and Development (OECD) confirm that Nigeria’s tax-to-GDP ratio remains at approximately 8.2 per cent to 9.3 per cent, consistently below the 10 per cent mark.
By comparison, for 2023-2025, the average ratio for African countries in terms of generated GDP in government revenue was 16.1 per cent. Kenya’s ratio was reported at 15.8 per cent; South Africa maintained a significantly higher ratio, often cited near 25–27 per cent in broader fiscal studies, though some specific nominal GDP lists place it at 13.9 per cent, depending on the definition of revenue used. This gap explains why Nigeria relies so heavily on borrowing. It is not simply spending too much; it is earning too little.
Pace and Structure of Borrowing
Since the current administration took office in May 2023, the total volume of approved and secured external financing has reached the $18 billion to $20 billion range. This includes a $3 billion crude oil-backed facility that was secured from Afreximbank in late 2023 to assist in stabilising the foreign exchange market. Also, the $2.2 billion raised in December 2024, in a dual-tranche issuance (6.5-year and 10-year notes) to help fund the 2024 budget deficit through Eurobonds, in December 2024 and another $2.35 billion in November 2025 in 10-year and 20-year notes, attracted an all-time high order book of over $13 billion.
Multilateral lenders have also played a significant role, with about $9 billion approved by the World Bank across multiple projects, including the $2.25 billion economic stabilisation credit (June 2024) and recent approvals for nutrition, health, and rural access; alongside roughly $1 billion from the African Development Bank (AfDB) in programmatic support and project-specific funding. The latest syndicated financing is the $516.3 million loan from Deutsche Bank, approved by the House of Representatives on April 28, 2026, which is dedicated to the Sokoto-Badagry Super Highway project. It is worthy of note that the cost of servicing these foreign debts reached $3.58 billion in the first nine months of 2024 alone, a 40 per cent increase year-on-year.
These figures strictly exclude domestic borrowing, which remains substantial and often comes at higher interest rates. Domestic debt stands at over N70 trillion, with interest rates significantly higher (averaging 18 per cent – 24 per cent) compared to external multilateral loans. The structure of these borrowings is as important as the scale. While the government officially categorises borrowings under different ‘envelopes’, they typically serve three distinct functions:
First category is ‘Capital Projects’: A portion of recent loans is strictly ‘project-tied’. For instance, the recent $516.3 million loan from Deutsche Bank is dedicated to the Sokoto-Badagry Super Highway. Similarly, roughly $1 billion of recent financing was earmarked for rehabilitating the Lagos and Tin Can Island ports. The second category is ‘Budget Support & Deficit Financing’: A major segment of borrowing is used for Development Policy Financing (DPF). These are not tied to specific physical projects but instead provide ‘budget support’ to help the government cover its overall fiscal deficit, which is projected at over N23.85 trillion for 2026.
Then lastly is ‘Refinancing & Debt Rollover’: A significant portion of new borrowing is used to pay off maturing obligations. In late 2024 and 2025, Nigeria spent nearly $3 billion on Eurobond debt servicing under the current administration, with only $500 million of that going toward reducing principal, while the rest went to interest.
In the 2025 and 2026 budget frameworks, ‘non-discretionary’ spending, which includes debt servicing and recurrent expenditure, regularly accounts for 60 per cent to 70 per cent of total federal expenditure.
Many experts and civil society groups have noted that borrowings are “weakly tied to productive returns” and are instead frequently used to maintain government liquidity. Despite the loans, capital expenditure has often suffered from slow implementation. For the 2026 fiscal year, the government actually halted new capital projects, directing agencies to “roll over” 70 per cent of their 2025 capital budget because funds had not yet been fully utilised or disbursed.
Debt Servicing
The most revealing indicator of Nigeria’s fiscal condition is the size of its debt servicing bill. The scale of debt servicing in the 2026 budget indeed dwarfs the combined allocations for the country’s most critical social and security sectors. In the 2026 federal budget, total expenditure is N68.32 trillion (increased by the National Assembly from the initial N58.18 trillion proposals). Out of this, debt servicing alone accounts for about N15.8 trillion.
To understand the scale, it is useful to compare this figure with other major spending categories. Defence and security are allocated about N5.4 trillion, infrastructure roughly N3.6 trillion, education about N3.5 trillion, and health approximately N2.5 trillion. Combined, these four sectors receive about N15 trillion. It is still less than what is allocated to servicing debt. A further look would indicate that, for every N1 spent on these four essential sectors combined, Nigeria spends roughly N1.06 just to service past debts.
Put another way, Nigeria spends more on paying interest and repaying loans than it does on defending the country, educating its population, building infrastructure, and providing healthcare combined. Debt servicing now consumes approximately 23 to 27 per cent of the total 2026 expenditure and is projected to absorb between 50 per cent and 60 per cent of total federally retained revenue. Debt servicing costs have risen aggressively from under N4 trillion in 2022 to nearly N16 trillion in the 2026 budget.
Interest vs Principal
Another critical dimension is the composition of debt servicing itself. Recent fiscal data confirms that Nigeria’s debt servicing is heavily weighted toward interest payments, which limits any actual reduction of the total debt stock.
Reports from DMO and major financial analysts indicate that, in terms of Eurobond Servicing, in recent periods, the imbalance in external commercial debt has been stark. Between Q3 2023 and Q2 2025, Nigeria spent approximately $2.93 billion servicing Eurobonds. Of that amount, $2.43 billion (83 per cent) was consumed by interest charges. Only $500 million (17 per cent) went toward reducing the actual principal.
In terms of Domestic Debt Servicing, the situation is even more extreme in the local market. Interest payments accounted for 95.7 per cent of total domestic debt service in 2025.
The government spent N8.24 trillion on domestic interest. Principal repayments remained minimal at just N370.93 billion (roughly 4.3 per cent). From the foregoing, it is clear that revenue is insufficient to pay down principal, hence, the government often uses new loans to pay off maturing ones; a process known as ‘refinancing’ or ‘debt rollover’.
In terms of Growing Debt Stock: As of December 2025, Nigeria’s total public debt climbed to N159.28 trillion, a 10.1 per cent year-on-year increase from 2024. On refinancing patterns, in late 2025, the government successfully raised $2.35 billion through a dual-tranche Eurobond, partly to redeem maturing 2025 bond obligations. But that still left out an outstanding Eurobond debt, which grew to $17.32 billion by mid-2025, representing nearly 37 per cent of all external debt.
A large proportion of Nigeria’s debt payments go toward interest rather than reducing the principal. In external debt servicing, particularly Eurobonds, estimates indicate that more than 70 per cent of payments are interest-related. This means that even as Nigeria services its debt, the underlying stock does not decline significantly. Instead, it often continues to grow, especially when new borrowing is used to refinance existing obligations.
Per Capita Implications
According to the latest data from the Debt Management Office (DMO) and recent National Bureau of Statistics (NBS) reports, the average burden per citizen has increased. With a total public debt estimated at around N159.3 trillion and a population of roughly 220 million, Nigeria’s debt translates to approximately N724,000 per citizen.
This figure is not a direct financial obligation for individuals, but it illustrates the scale of the burden relative to the population. It also highlights the long-term implications for public finance, as future budgets will need to accommodate these obligations through taxation, reduced spending, or further borrowing. Meanwhile, the 2026 budget includes a fresh borrowing plan of N29.2 trillion to cover a N31.46 trillion deficit, suggesting the per-capita burden will continue to rise.
Who Nigeria Owes
Nigeria’s debt is held by a mix of multilateral institutions, bilateral lenders, commercial lenders and private investors. The largest single creditor is the concessional lending arm of the World Bank, with exposure estimated at $18 billion to $19 billion primarily through the International Development Association (IDA). Some early 2026 estimates suggest this has risen toward $20.2 billion following recent approvals for economic reforms.
Other multilateral lenders collectively hold about 49.4 per cent of external debt, including the African Development Bank ($3.3 billion) and the IMF ($2 billion). In terms of Commercial Lenders, Eurobond investors are the second-largest component of Nigeria’s external debt, with outstanding obligations rising to $18.5 billion by the end of 2025.
In terms of Bilateral Lenders (State-to-State), China (Exim Bank) remains the leading bilateral lender with exposure of $4.91 billion as of mid-2025. Some late 2025 data indicate this may have increased slightly to $5.6 billion. Other smaller exposures are held by France, Japan, India, and Germany. This diversified creditor base provides access to financing but also exposes Nigeria to varying interest rates and repayment conditions, particularly in global capital markets where borrowing costs can be volatile.
Government’s Argument: Context Matters
The Tinubu administration argues that Nigeria’s debt figures must be interpreted within a broader context. Government officials have consistently provided the following justifications for the country’s rising debt profile: Contextualising Debt Growth: The Budget Office of the Federation has argued that the jump in total public debt (to N159.28 trillion as of late 2025) is primarily a “valuation effect.”
Exchange Rate Impact: Because a significant portion of Nigeria’s debt is denominated in US dollars, the devaluation of the Naira automatically increases the equivalent Naira value of those loans. Inherited Liabilities: Officials also point to the securitisation of N30 trillion in “Ways and Means” overdrafts from the central bank as a formalisation of debt that already existed, rather than “fresh” spending.
Reform-Led Stability: The administration defends subsidy removal and exchange rate unification as essential “painful but necessary” steps to avoid national bankruptcy.
Market Access & GDP: Especially in the aspect of investors’ demand, Nigeria has successfully maintained access to global markets. For example, the $2.2 billion December 2024 Eurobond and the $2.35 billion November 2025 issuance were both heavily oversubscribed, signalling continued (albeit expensive) investor interest.
Economic Growth: Real GDP growth has indeed hovered around the 3 per cent to 4 per cent range, estimated at 3.87 per cent for 2025, which the government uses as evidence of a “cautious recovery”.
‘Critics’ Position: A Growing Risk
Critics focus on the debt service-to-revenue ratio as the most important metric. They argue that while the Debt-to-GDP ratio (around 50 per cent) looks manageable on paper, it is a “vanity metric.” The Debt Service-to-Revenue ratio is the true indicator of “fiscal oxygen.”
In 2024 and through the first half of 2025, Nigeria’s debt service-to-revenue ratio frequently crossed the 100 per cent threshold. When a country spends more on interest than it earns, it must borrow more just to pay its staff and run basic operations, creating a debt trap.
On point, focusing on borrowing for consumption vs investment, Economists point to the “Golden Rule” of public finance; borrowing should only be for capital projects that generate future economic returns (e.g., railways, power plants).
As earlier noted, a “significant share” of Nigeria’s borrowing has been diverted to budget support (covering deficits in salaries and overheads). Critics argue that this is like taking a bank loan to buy groceries rather than starting a business; it increases debt without increasing the capacity to pay it back. There is also growing concern over the “rubber stamp” nature of the National Assembly regarding loan requests.
Major loan requests, such as the $2.2 billion Eurobond and the recent $516 million highway loan, have often been approved within 24 to 48 hours of being sent to the Senate, sometimes without a detailed breakdown of the terms or the specific project milestones.
Critics often call for more clarity on collateral (especially for oil-backed loans like the Afreximbank deal) and the specific interest rates on bilateral loans from China and other non-Paris Club creditors.
A System under Strain
Nigeria’s fiscal position reflects a system under considerable strain. While Nigeria’s debt-to-GDP ratio, recently estimated at 52.7 per cent, is lower than that of many developed nations, the real pressure lies in revenue. Recent data confirms that the government has committed between 70 per cent and 90 per cent of its revenue to servicing debt. In early 2025, debt servicing and personnel costs together actually exceeded total earned revenue, meaning borrowing was essential just to pay salaries and keep the government running.
Because such a massive share of revenue is earmarked for “non-discretionary” spending (debt and wages), capital expenditure for infrastructure, education, and healthcare is frequently crowded out.
The IMF and World Bank have both warned that this “addiction” to borrowing to cover deficits creates a debt spiral. Every new loan taken today to fund the N29.2 trillion deficit projected for 2026 adds to the interest burden of tomorrow.
The Tinubu administration, however, argues that these steps are part of a broader reform agenda intended to stabilise the economy. They point to GDP growth (estimated at 3.87 per cent for 2025) and a doubling of aggregate revenues following the removal of the fuel subsidy and FX liberalisation as signs that the “delicate balance” is shifting toward long-term sustainability.
However, we must acknowledge that on one hand, borrowing has allowed the government to sustain operations and implement reforms during a period of economic adjustment. On the other hand, rising debt servicing costs have reduced the space for development spending. The result is a delicate balance. Without borrowing, the government would struggle to meet its obligations. But continued borrowing increases future obligations, tightening the fiscal constraint even further.
What the Numbers Reveal
The numbers tell a clear, if not complex, story. Nigeria has a public debt stock of roughly N159 trillion, equivalent to about $111 billion. It spends close to N16 trillion annually on debt servicing, an amount that exceeds the combined budgets of key development sectors.
Its revenue remains weak, at less than 10 per cent of GDP, forcing reliance on borrowing to finance both capital and recurrent expenditure. At the same time, structural reforms have reshaped the economy, altering exchange rates and fiscal dynamics in ways that amplify the appearance of debt growth.
For the current trajectory to stabilise, GDP growth and revenue growth must outpace the effective interest rate on the debt. While GDP is growing at roughly 3.8 per cent to 4.2 per cent, interest rates on domestic borrowing (which makes up the bulk of the debt) are often above 20 per cent due to the central bank’s efforts to fight inflation. This creates a “negative carry” where the debt grows faster than the economy’s ability to pay for it.
The government is betting on the “Revenue Mobilisation Strategy” to escape this cycle. They aim to raise the tax-to-GDP ratio to 18 per cent within three years through automation and closing loopholes rather than just raising tax rates. Strategic infrastructure (like the Lagos-Calabar or Sokoto-Badagry highways) will surely boost trade, while tax reforms double revenue, bringing the debt service ratio down to a sustainable 40-50 per cent as projected by several economic experts.
However, the central question is not simply whether Nigeria is borrowing too much. It is whether the borrowing is translating into growth strong enough to sustain repayment. If it does, the current trajectory may stabilise over time. If it does not, Nigeria risks remaining in a cycle where debt finances the present but constrains the future.
