Nigeria's Domestic Debt Servicing Skyrockets to N8.6 Trillion in 2025
Nigeria's fiscal landscape is undergoing a significant transformation as domestic debt servicing costs have surged dramatically, now eclipsing external debt obligations by a substantial margin. According to the latest data released by the Debt Management Office, the country's total debt servicing expenditure climbed to N15.81 trillion in 2025, marking a sharp 23.2 percent increase from the N12.83 trillion recorded in 2024.
Domestic Debt Takes Center Stage
The most striking development is the explosive growth in domestic debt servicing, which jumped by an alarming 46 percent to reach N8.61 trillion. This figure now represents more than half of Nigeria's total debt service burden, signaling a fundamental shift in the country's debt profile. Just one year earlier, external debt had constituted the larger portion of Nigeria's repayment obligations.
This dramatic increase underscores Nigeria's growing dependence on local borrowing instruments, particularly Nigerian Treasury Bills, where interest payments experienced an extraordinary surge. Treasury bill costs escalated from N747 billion in 2024 to a staggering N2.55 trillion in 2025—representing a more than threefold increase within a single year.
Interest Payments Dominate Debt Structure
A detailed analysis reveals that interest payments continue to dominate Nigeria's domestic debt architecture, accounting for nearly 96 percent of total servicing costs. Federal Government bonds remained the largest single cost component, with interest payments rising to N5.35 trillion. However, their relative share of total domestic interest actually declined, reflecting the much faster growth trajectory of Treasury bill obligations.
In stark contrast, actual repayment of borrowed principal remains minimal, contributing just over four percent to total domestic servicing costs. This imbalance highlights Nigeria's increasing reliance on short-term borrowing instruments and points to mounting refinancing pressures in the coming years.
External Debt Shows More Balanced Profile
On the external front, debt servicing rose more modestly to $5.15 billion in 2025. When converted to naira terms, this translates to approximately N7.39 trillion, reflecting a significantly slower growth rate compared to domestic obligations. Unlike the domestic debt structure, external servicing demonstrates a more balanced composition between principal and interest payments.
Commercial debt—particularly Eurobonds—remains the most significant external pressure point, accounting for nearly half of total external repayments. Multilateral institutions including the World Bank and the International Monetary Fund also feature prominently in Nigeria's external debt obligations, though their growth rates have been more contained compared to domestic instruments.
Fiscal Implications and Expert Concerns
The data reveals a troubling fiscal reality: Nigeria is now spending more to service its debts than to invest in critical development projects. Reports indicate that debt servicing exceeded capital expenditure by N3.9 trillion during the same period, significantly constraining the government's spending capacity for infrastructure, social services, and economic development initiatives.
Economic analysts have issued warnings that the escalating cost of borrowing could continue to strain public finances. Ikenna Ofoegbu, Programme Manager at Heinrich Böll Stiftung, observed that despite some marginal improvement from previous years, a substantial portion of government revenue remains channeled into debt servicing rather than productive investments.
Beyond the numerical data, development experts are drawing attention to the tangible human consequences of Nigeria's growing debt burden. Folahan Johnson of the Centre for Inclusive Social Development emphasized that the impact of rising debt extends far beyond fiscal metrics, directly affecting citizens' access to education, healthcare, and basic social services.
With borrowing projections for 2026 already revised upward, concerns are mounting regarding sustainability, transparency, and the long-term implications of Nigeria's deepening debt profile. The dramatic shift toward domestic borrowing—particularly short-term instruments with higher interest rates—raises fundamental questions about fiscal management and economic stability in the years ahead.
