Nigeria’s N149.39tn Public Debt Triggers Alarms Over Sustainability and State-Level Exposure
Nigeria’s public debt surged to ₦149.39 trillion as of March 31, 2025, sparking serious concerns from experts over debt sustainability, fiscal stability, and potential risks of sovereign default. The new figure marks a significant 22% increase from ₦121.67 trillion recorded in Q1 2024, according to fresh data from the Debt Management Office (DMO). This upward spike was driven by a combination of increased borrowing and naira devaluation, which inflated the naira equivalent of Nigeria’s external obligations.
Economists and financial analysts have called for urgent fiscal reforms and more aggressive revenue generation strategies. Professor Hassan Oaikhenan of the University of Benin warned that the rising debt levels, especially at the state and local government levels, could jeopardize service delivery and lead to financial strain. He emphasized the need for fiscal discipline and reduced non-essential spending to avoid budgetary imbalances. Analysts like Teslim Shitta-Bey from Proshare Nigeria added that sub-national debt could impair the overall fiscal health of the country.
The federal government remains the largest debtor, holding ₦74.89 trillion in domestic liabilities, while states and the FCT accounted for ₦3.87 trillion. Although this marks a slight decline in sub-national debt compared to previous quarters, experts attribute this either to improved debt servicing or a reduction in new borrowings. However, with FAAC allocations rising since the removal of fuel subsidies, stakeholders argue that states should be paying down their debts more aggressively.
Nigeria’s external debt rose to ₦70.63 trillion ($45.98 billion), up by ₦14.61 trillion from a year earlier. Despite only a modest $3.86 billion increase in dollar terms, the naira’s depreciation against the U.S. dollar (from ₦1,330.26/$1 in Q1 2024) significantly inflated the debt’s naira value. This external debt includes loans from multilateral lenders like the World Bank and AfDB, bilateral arrangements, and commercial borrowings such as Eurobonds, adding to Nigeria’s vulnerability to currency fluctuations.
By March 2025, Nigeria’s domestic debt stock reached ₦78.76 trillion, representing a 20% year-on-year increase. This brought the debt composition to 52.7% domestic and 47.3% external, a slight shift from 54% domestic and 46% external in Q1 2024. The growing share of external debt highlights mounting pressure from currency instability and inflationary trends, leading to heightened risks in debt servicing. As both domestic and international borrowing continue to fuel public expenditure, experts urge a structural overhaul to ensure long-term debt sustainability.
Source: Leadership