Lilian Ugwu
Nigeria’s rising debt profile is once again in focus after new data revealed that the country’s total public debt climbed to N159.28 trillion as of December 31, 2025, underscoring growing concerns about fiscal sustainability, revenue pressures, and long-term economic stability.
The latest figures released by the Debt Management Office (DMO) show a steady and significant increase in the nation’s debt burden, driven by a combination of fresh domestic and external borrowings. Within just three months, Nigeria’s total debt rose by N5.98 trillion, representing a 3.9 per cent increase from N153.29 trillion recorded at the end of September 2025.
On a year-on-year basis, the numbers paint an even more striking picture. Compared to N144.67 trillion recorded in December 2024, the country’s total debt has increased by N14.61 trillion, marking a 10.1 per cent rise within a year.
This upward trajectory highlights a persistent reliance on borrowing to finance government operations, infrastructure projects, and fiscal deficits—raising questions about how sustainable this approach remains in the face of limited revenue growth.
Domestic Borrowing Drives Debt Surge
A closer look at the data shows that domestic borrowing remains the primary driver of Nigeria’s rising debt profile.
As of December 2025, domestic debt stood at N84.85 trillion, up from N81.82 trillion in September of the same year. This represents a quarterly increase of N3.03 trillion, accounting for the larger share of total debt.
Domestic debt now makes up 53.27 per cent of Nigeria’s total debt stock, compared to 46.73 per cent for external debt. While this structure has remained relatively stable, the dominance of domestic borrowing signals increased pressure on the local financial system.
Economists warn that excessive domestic borrowing could crowd out private sector access to credit, as government demand for funds competes with businesses seeking loans for investment and expansion.
On a year-on-year basis, domestic debt recorded an even sharper increase of N10.47 trillion, rising from N74.38 trillion in December 2024. This reinforces its position as the main contributor to Nigeria’s debt accumulation.
External Debt Also on the Rise
Although domestic borrowing is leading the trend, external debt has also continued to grow.
Nigeria’s external debt rose from N71.48 trillion in September 2025 to N74.43 trillion in December 2025, reflecting a quarterly increase of N2.95 trillion. In dollar terms, total public debt increased from $103.94 billion to $110.97 billion within the same period.
External borrowing remains a critical component of Nigeria’s financing strategy, often used to fund capital-intensive projects and support foreign exchange reserves.
However, rising external debt exposes the country to exchange rate risks, especially in a volatile currency environment. Although recent exchange rate adjustments helped moderate the naira value of external debt, analysts caution that future currency fluctuations could significantly increase repayment obligations.
Federal Government Dominates Borrowing
The data also reveals that the Federal Government accounts for the bulk of Nigeria’s debt.
As of December 2025, the Federal Government held N80.49 trillion in domestic debt and N66.27 trillion in external debt, far exceeding the borrowing levels of states and the Federal Capital Territory.
State governments and the FCT collectively accounted for N4.36 trillion in domestic debt and N8.16 trillion in external debt, highlighting the central government’s dominant role in debt accumulation.
This concentration of debt at the federal level raises concerns about fiscal management and the ability of the government to meet its repayment obligations without placing additional strain on the economy.
Debt Sustainability Under Scrutiny
Nigeria’s growing debt profile is reigniting debates around debt sustainability, particularly in light of the country’s relatively low revenue base.
While borrowing itself is not inherently problematic, experts stress that the key issue lies in how borrowed funds are utilised and whether they generate sufficient economic returns.
Concerns are mounting that a significant portion of Nigeria’s debt is being used to finance recurrent expenditure rather than productive investments that can stimulate growth and generate revenue.
This raises the risk of a debt trap, where the government may need to borrow more simply to service existing obligations.
Debt servicing costs have already become a major burden on Nigeria’s finances, consuming a large share of government revenue and limiting fiscal space for critical sectors such as healthcare, education, and infrastructure.
Transparency and Legislative Oversight
In response to concerns about rising debt, the Director-General of the Debt Management Office, Patience Oniha, has defended Nigeria’s borrowing process, emphasising the role of legislative oversight in ensuring transparency and accountability.
Speaking at the IMF Spring Meetings in Washington, DC, she explained that all borrowing requests must receive approval from the National Assembly before they are finalised.
According to her, this process involves detailed scrutiny of loan terms, lenders, and potential economic impacts, with lawmakers empowered to request additional information or reject proposals if necessary.
She noted that the transparency of the process, which is often conducted publicly, helps build investor confidence and ensures compliance with legal frameworks.
However, Oniha also acknowledged that there is room for improvement, particularly in strengthening the technical capacity of lawmakers to effectively evaluate complex financial instruments.
She highlighted the need for regular training and collaboration with international partners to enhance the quality of legislative oversight.
Balancing Debt and Revenue
Beyond transparency, experts argue that Nigeria must shift its focus toward improving revenue generation to reduce reliance on borrowing.
Despite its large economy, Nigeria continues to struggle with low revenue mobilisation, driven by factors such as tax inefficiencies, oil dependency, and economic volatility.
Analysts suggest that without significant improvements in revenue, the country’s debt burden could become increasingly difficult to manage.
Oniha echoed this concern, stressing the importance of balancing borrowing with revenue growth.
“We should be looking at how debt can affect fiscal space, how it can support development, and at what point we should begin to focus more on revenues instead of continuous borrowing,” she said.
What Lies Ahead
As Nigeria’s debt continues to rise, the key challenge will be ensuring that borrowing translates into tangible economic benefits.
Investments in infrastructure, energy, and industrial development could help boost productivity and create jobs, ultimately improving the country’s ability to repay its obligations.
However, failure to address structural issues such as low revenue generation, inefficient spending, and weak economic diversification could undermine these efforts.
With total public debt now approaching N160 trillion, the stakes are higher than ever.
For policymakers, the task ahead is clear: strike a balance between financing development and maintaining fiscal discipline to avoid long-term economic risks.
For citizens, the impact of rising debt may be felt through reduced public spending, higher taxes, or inflationary pressures—making the issue not just a matter of policy, but one that affects everyday life.
Juliet Ezeh is the founder and chief reporter at Westbridge Reporters with over 7 years of experience in journalism. She covers crime, industry, policy, and social developments, delivering timely and accurate reporting.