Nigeria’s Debt Financing Strategy Raises Concerns Over Sustainability and Economic Stability
Nigeria’s growing reliance on asset sales and multilateral loans to finance its public debt is sparking concerns about the sustainability of its debt strategy. The country’s current debt stands at approximately N135 trillion, with projections suggesting it could increase to N150 trillion by the end of the year. Experts warn that this rising debt burden, alongside high servicing costs, could limit the government’s ability to fund critical infrastructure and social services.
A report from Kreston Pedabo economists forecasts modest growth for Nigeria in 2025 but highlights significant structural challenges, including inflation, a depreciating naira, and increasing debt servicing costs. The report indicates that Nigeria’s deficit financing strategy is unsustainable, with an eight percent country default spread suggesting elevated investor caution. These factors, combined with persistent insecurity and infrastructure deficits, continue to stifle the nation’s economic reforms.
Rising inflationary pressures are eroding purchasing power, raising operational costs, and dampening consumer demand. This, coupled with a depreciating naira, is discouraging investment and exacerbating foreign exchange shortages. Meanwhile, the oil sector faces risks such as theft, pipeline vandalism, and price fluctuations, impacting Nigeria’s revenue recovery. The government’s renewed focus on security in oil-producing regions and reforms in the petroleum sector could provide some stability.
In the non-oil sector, high production costs, limited credit access, and inflation are hurting key industries like agriculture, manufacturing, and services. Pedabo’s report stresses the importance of policies that incentivize local manufacturing, modernize agriculture, and enhance digital infrastructure to support growth. The capital market is projected to experience moderate growth in 2025, driven by ongoing reforms, but foreign portfolio outflows and rising domestic borrowing costs remain significant risks.
To address these challenges, the report calls for strategic policies to boost economic resilience, including public-private partnerships, export diversification, and investments in renewable energy, infrastructure, and technology. It emphasizes the need to modernize the agriculture sector and enhance digital infrastructure to promote sustainable growth and reduce dependency on imports.
Source: Leadership