April 10, 2025/FBNQuest Research

The most recent data published by the Debt Management Office (DMO) shows a steady increase in Nigeria’s debt burden. Sequentially, the nation’s debt stock rose by a modest 2% quarter-on-quarter (QoQ) to N144.7trn as at the end of Dec ’2024. However, the YoY rise was more pronounced, growing by 49% YoY. The steep YoY rise was primarily driven by the Naira depreciation, which raised the overall value of external debt stock to N70.3trn (US$45.8bn), up from N38.2trn (US$42.5bn) registered in the year-earlier period. In addition to currency devaluation, greater reliance on the domestic market has contributed to the elevated debt position. For illustration, Nigeria’s domestic debt profile has risen by c.26% YoY to about N74.4trn as of Dec ’2024.

• The composition of Nigeria’s debt stock has steadily evolved, with the share of the external debt component in the total debt mix rising to 49% as of Dec ‘2024 from 39% in the year-earlier period.
• A reasonable explanation for the significant shift in the proportion of external debt relative to the overall debt mix is the devaluation of the Naira, which depreciated by around -41% YoY in 2024.
• The mounting external debt profile further highlights the risk associated with external financing due to its exposure to exchange rate volatility.     
• Although the proportion of domestic debt stock still accounted for the bulk of the nation’s debt profile at c.51%, its share contracted by -10 bps YoY.
• In standardised terms, the current total debt stock implies a FY ’2024 debt-to-GDP ratio of 54%, well above the 42% recorded in Dec ’2023 and the DMO’s self-imposed limit of 40%.
• The alarming rise in the nation’s debt profile continues to raise concerns over debt sustainability, reinforcing the need for strategic reforms and policies towards diversifying revenue generation, given the prevailing risks to the nation’s oil earnings.    
• Looking ahead, we anticipate a sustained rise in Nigeria’s debt stock due to additional external borrowing, with the loan of US$1.1bn recently secured from the World Bank and the inherent exchange rate risk associated with external loans.
• In addition, the estimated N13.1trn deficit contained in the 2025 budget is expected to be financed through debt, with planned domestic borrowings of N7.4trn.
• Other financing sources include total external borrowing of N1.8trn (c. US$1.2bn) in market-related foreign borrowings, coupled with N3.5trn in multilateral and bilateral loans