Economic experts say Nigeria’s recent macroeconomic improvements are being tempered by a rising public debt profile, even as the Central Bank of Nigeria (CBN) implements a cautious 50-basis-point cut to the Monetary Policy Rate (MPR). The central bank’s decision aims to support growth amid easing inflation, stable exchange rates, stronger external reserves, and sustained GDP expansion, but mounting debt may limit its impact.
According to the Debt Management Office (DMO), Nigeria’s total public debt climbed to N153.29 trillion as of September 2025, up 7.71% from N142.32 trillion the previous year and 0.59% from June 2025 levels. Domestic debt reached N81.82 trillion, accounting for 52.9% of total debt, while external borrowings rose to N71.48 trillion. Analysts note that the government’s reliance on domestic markets and growing interest payments could pressure fiscal stability.
Despite higher debt levels, Nigeria’s debt-to-GDP ratio improved to 37.13% from 40.68% in 2024, supported by GDP growth and slower debt accumulation. However, domestic debt servicing surged 47.56% year-on-year to N6.32 trillion, largely driven by a sharp increase in Treasury bill interest payments. External debt service, in contrast, fell by 6.79% to $3.34 billion, helped by reduced multilateral obligations despite a rise in bilateral payments.
The CBN’s Monetary Policy Committee reduced the MPR to 26.5% while keeping other parameters unchanged, citing disinflation, exchange rate stability, and real sector expansion as key drivers. Experts from Afrinvest Research said that stronger external reserves, improved energy supply, and positive foreign inflows reinforced the bank’s dovish stance. They also highlighted pre-election fiscal dynamics as a potential risk, with the rescheduled 2027 elections possibly accelerating political spending and complicating monetary policy transmission.
Meristem Securities warned that public debt may continue rising in 2026 due to higher domestic borrowing and a wider budget deficit of N23.85 trillion. Analysts believe that while the MPR cut may ease corporate borrowing costs and boost investment, vigilance will be needed to manage liquidity and debt pressures. Stable exchange rates and favorable external financing conditions could help mitigate short-term external debt servicing challenges.
source: punch