Fresh worries as Nigeria’s public debt climbs to N159.28 trillion

Nigeria’s rising debt profile is drawing renewed concern from economists and global institutions, as the country’s total public debt hits N159.28 trillion, intensifying fears over fiscal sustainability and economic stability.

Analysts say the problem is not just the volume of borrowing, but the country’s weak revenue base, which leaves little room to service debts and fund critical infrastructure. Over the past three years, Nigeria has spent about 70.7 per cent of its revenue on debt servicing, limiting its ability to address an estimated $300 million annual infrastructure gap.

Although the Tinubu administration initially reduced the share of spending devoted to debt—from nearly 100 per cent in previous years to 68 per cent in 2023 and 60 per cent in 2024—recent figures suggest a reversal. In the first half of last year, debt servicing rose sharply to N9.14 trillion, accounting for 84 per cent of total revenue.

The government has also continued to rely on borrowing to fund routine expenses. Between 2022 and 2025, recurrent expenditure averaged 127 per cent of revenue, contrary to fiscal rules that limit borrowing to capital projects. While there was some improvement in 2024, early data from last year indicates renewed fiscal pressure.

Nigeria’s fiscal deficit remains a major concern, with the 2026 budget projecting a gap of about N23.85 trillion. Past estimates have often been exceeded, underscoring persistent budgetary strain. Meanwhile, the country’s debt stock grew by 10 per cent year-on-year—outpacing economic growth and raising questions about long-term sustainability.

The International Monetary Fund (IMF) has warned that tightening global financial conditions could make borrowing more expensive, especially for countries like Nigeria with significant external debt exposure. As of the end of last year, Nigeria’s external debt stood at $51.86 billion, growing faster than total debt.

Recent borrowing plans—including a $6 billion facility approved by the National Assembly and a $990 million port development deal with the UK—are expected to further increase foreign debt exposure, as the government seeks to finance its widening deficit.

Globally, the IMF projects public debt could reach 100 per cent of GDP by 2029, driven by rising deficits in major economies. Higher global interest rates and a stronger U.S. dollar could further raise the cost of servicing external loans for developing countries.

Experts are divided on how to assess Nigeria’s debt burden. While the country’s debt-to-GDP ratio of about 36 per cent appears moderate compared to the global average, some economists argue that GDP is not a reliable benchmark due to data limitations.

Professor Godwin Owoh criticised Nigeria’s borrowing strategy as poorly structured and disconnected from revenue-generating projects, calling for greater transparency and stricter legislative oversight. He also stressed the need for clearly defined borrowing limits.

Similarly, Professor Chiwuike Uba pointed to structural weaknesses in the economy, noting that growth remains narrow and heavily service-driven, with limited job creation and revenue generation. Without stronger performance in sectors like agriculture and manufacturing, he warned, borrowing will remain unavoidable.

He also raised concerns about inefficient public spending, citing low implementation of capital projects and questionable use of borrowed funds.

The IMF has advised Nigeria to strengthen revenue mobilisation, expand its tax base, and improve fiscal discipline to reduce reliance on debt. It also warned against inefficient subsidies and weak oversight, which could worsen the country’s debt risks.

However, some analysts maintain that borrowing is not inherently harmful if properly managed. Investment banker Tolulope Alayande argued that loans directed at key sectors such as power, transport, and agriculture could drive growth and improve repayment capacity.

While he acknowledged that Nigeria is under significant debt pressure, he said the current administration is working to stabilise the economy after years of fiscal mismanagement.

Even so, with rising deficits, growing debt obligations, and uncertain global conditions, concerns persist that Nigeria’s debt trajectory could weigh heavily on its economic future if not carefully managed.