Nigeria's total public debt has climbed to a staggering N152.39 trillion, raising fresh alarms among financial experts about the country's economic direction. This increase comes despite a historic reduction in the combined debt burden of the 36 states and the Federal Capital Territory (FCT).
Federal Debt Surge and Short-Term Investment Dangers
According to the latest data from the National Bureau of Statistics (NBS), the national debt stock grew by 2.01 per cent quarter-on-quarter, rising from N149.38 trillion in the first quarter of 2025. Year-on-year, the increase is a substantial N18.09 trillion from the N134.3 trillion recorded in the second quarter of 2024.
Market operators are sounding the alarm over the Federal Government's heavy reliance on short-term borrowing instruments like treasury bills and commercial papers. In just the first half of 2025, over N6 trillion was raised through such domestic channels. Experts warn this trend creates structural pressures and poses a severe threat to long-term fiscal stability.
Dr Paul Uzum, Executive Director of Halo Capital Management, explained the phenomenon. He linked the strong investor preference for short-term securities to Nigeria's volatile macroeconomic climate, characterized by surging inflation, a weakening naira, and unpredictable policy shifts. This has led to an inverted yield curve, where one-year treasury bills yield about 19 per cent, outpacing the roughly 15.5 per cent offered on 10-year bonds.
State-Level Debt Relief Amid Rising FAAC Allocations
In a contrasting development, the combined debts of Nigeria's 36 states and the FCT have declined for the first time in over a decade. The total fell slightly from N11.47 trillion in Q2 2024 to N11.32 trillion in Q2 2025.
This marginal decrease coincides with a significant 41 per cent increase in allocations from the Federation Account Allocation Committee (FAAC). States received a total of N5.52 trillion in the first nine months of 2025, compared to N3.92 trillion in the same period of 2024.
Several states achieved remarkable debt reductions:
- Jigawa cut its debt by about 95% to approximately N1.06 billion.
- Ondo reduced its debt by 77%, from N71.5 billion to N11.76 billion.
- Kebbi achieved a 72% reduction, settling at around N15.10 billion.
- Ebonyi and Kogi states both reduced their debts by 68%.
Lagos State retains the highest domestic debt at N1.04 trillion, followed by Rivers with N364.39 billion.
Long-Term Development at Risk and Soaring Debt Ratios
Independent investor Amaechi Egbo cautioned that the dominance of short-term capital is creating a dangerous mismatch with Nigeria's long-term infrastructure needs in transport, housing, and energy. He warned of higher refinancing risks, weakened investor confidence, and prolonged project timelines.
The debt situation is further strained by the Federal Government's recent $2.35 billion Eurobond issuance, which attracted $13 billion in orders. Analysts fear this could push the total debt stock even higher by year's end.
Nigeria's debt-to-Gross Domestic Product (GDP) ratio has now crossed the 40 per cent threshold recommended by the government, with some analysts estimating it could approach 50%. Debt servicing is projected to consume N15.81 trillion in the 2025 budget, accounting for 45% of projected revenues.
Experts conclude that without stronger policy reforms, incentives for long-term investments, and deeper capital market development, Nigeria risks sacrificing its developmental future to immediate financial pressures.
