Nigeria's Public Debt Climbs to N159.28 Trillion Amid Funding Concerns
Nigeria's public debt has reached a staggering N159.28 trillion, raising fresh alarms over funding risks and long-term sustainability. This figure, reported by the Debt Management Office (DMO) for the end of last year, marks a 10% year-on-year increase, outpacing the country's economic growth and intensifying worries about fiscal management.
Debt Service Costs Strain Revenue and Infrastructure
The Federal Government faces a critical challenge as debt service costs consume a significant portion of revenue, leaving little for essential infrastructure development. Over the past three years, the debt service cost-to-revenue ratio has averaged 70.7%, severely limiting funds needed to address an estimated $300 million annual infrastructure gap. While President Bola Tinubu's administration has made strides in reducing this ratio from 68% in 2023 to 60% in 2024, recent data suggests a potential reversal. The half-year report for last year shows debt service costs rising to N9.14 trillion, or 84% of accrued revenue, indicating a possible loss of fiscal control.
Recurrent Expenditure and Fiscal Deficits Exacerbate Debt Burden
From 2022 to 2025, the government spent an average of 127% of its revenue on recurrent expenditure, meaning it borrowed to meet routine needs—a practice contrary to the Fiscal Responsibility Act, which restricts borrowing to capital projects. Although recurrent expenditure as a percentage of revenue has declined from 152% in 2022 to 101% in 2024, it spiked to 130% in the first half of last year, highlighting ongoing fiscal pressures. This year's fiscal deficit is projected at N23.85 trillion, with a history of overruns, such as the 15% overshoot in 2024, further complicating debt management.
IMF Warns of Global Debt Risks and Higher Borrowing Costs
The International Monetary Fund (IMF) has issued a stark warning, projecting global public debt to rise to 100% of GDP by 2029. In its latest Fiscal Monitor, the IMF notes that worsening global debt conditions, driven by persistent deficits in major economies like the United States and China, could tighten borrowing costs for emerging markets like Nigeria. A stronger dollar, resulting from increased U.S. borrowing, raises the cost of servicing external debt, posing a significant threat to Nigeria, which holds $51.86 billion in external debt—a 13.3% year-on-year increase. Recent approvals for new debt contracts, including $6 billion from First Abu Dhabi Bank and Citibank, add to this exposure.
Economists Debate Debt Benchmarking and Structural Weaknesses
Economists are divided on how to assess Nigeria's debt sustainability. Prof. Godwin Owoh questions the use of GDP as a benchmark, citing unreliable economic data and unstructured borrowing patterns that lack cash flow analysis. He advocates for greater transparency and legislative scrutiny of loan terms. Meanwhile, Prof. Chiwuike Uba points to deeper structural issues, noting that Nigeria's service-driven growth fails to generate sufficient revenue or jobs, making borrowing inevitable. He criticizes low capital budget implementation and misallocation of funds, warning that without productive investments, debt will continue to rise without economic returns.
Pathways to Mitigate Debt Risks and Foster Growth
To address these challenges, experts recommend strengthening domestic revenue mobilization, broadening tax bases, and improving fiscal discipline. Investment banker Tolulope Alayande argues that borrowing can be beneficial if directed toward productive sectors like power, transport, and agriculture, which could stimulate growth and enhance repayment capacity. The IMF echoes this, advising Nigeria to reduce dependence on borrowing through better fiscal practices and oversight. As global tensions and supply disruptions push countries toward more borrowing, Nigeria must prioritize efficient resource deployment to support business growth and economic productivity, ultimately reducing reliance on debt.
