March 26, 2025/CSL Research
Nigeria’s debt servicing costs soared to a four-year high of US$4.65 billion by the end of 2024, reflecting the Federal Government’s continued reliance on borrowing and the impact of Naira depreciation on external debt. According to data from the Central Bank of Nigeria (CBN), the country’s debt servicing expenditure in 2024 increased by 32.9% y/y, up from US$3.5 billion in 2023. The sharp rise in debt servicing highlights Nigeria’s growing fiscal burden amid ongoing economic challenges.
The depreciation of the Naira has significantly increased the cost of repaying external debt, making dollar-denominated obligations more expensive in local currency terms. This trend raises concerns about long-term debt sustainability and the government’s ability to balance borrowing with economic growth.
According to the most recent recent data from Nigeria’s Debt Management Office (DMO), the country’s total public debt reached ₦142.32 trillion (US$88.89 billion) by the end of Q3 2024. This represents a 5.97% increase from ₦134.30 trillion (US$91.35 billion) recorded at the end of Q2 2024 and a significant 61.89% rise from ₦87.91 trillion (US$114.35 billion) in Q3 2023.The debt encompasses both domestic and external liabilities, covering the Federal Government, the 36 state governments, and the Federal Capital Territory. The 5.97% q/q increase of ₦8.02 trillion in public debt was partly driven by the depreciation of the Naira.
While external debt declined in dollar terms during the quarter, its Naira equivalent increased,
rising from ₦63.07 trillion in June 2024 to ₦68.89 trillion by the end of Q3 2024.
The rise in total public debt was further fuelled by an increase in domestic debt, which grew from ₦71.22 trillion at the close of Q2 2024 to ₦73.43 trillion by the end of Q3 2024. This ₦2.21 trillion increase was primarily due to new borrowings by the Federal Government to finance the 2024 budget deficit. Domestic debt is composed mainly of FGN bonds, treasury bills, treasury bonds, savings bonds, FGN Sukuk, promissory notes, and green bonds. As of Q3 2024, FGN bonds and treasury bills accounted for 83.05% and 16.95%, respectively, of the total domestic debt stock. Nigeria’s public debt has experienced a sharp increase in recent years, rising by 1,111.35% over the past 12 years and by 194.57% since the current administration assumed office.
Despite this substantial growth, the International Monetary Fund (IMF) considers Nigeria’s debt sustainable, as the country’s debt-to-GDP ratio remains within acceptable thresholds. Over the medium to long term, the debt-to-GDP ratio is projected to decline, particularly with the planned rebasing of GDP. Additionally, proposed tax reforms are expected to increase government revenue, thereby reducing reliance on borrowing. Tax reforms are clearly needed to improve tax mobilization in Nigeria. According to the World Bank, a tax revenue of 15.00% of GDP enhances growth through higher spending on health, education and promoting economic stability.
Click here to download full report: CSL Nigeria Daily – 26 March 2025- Public debt.pdf
