October 13, 2025/CSL Report
According to data released by the Debt Management Office (DMO) last week, Nigeria’s total public debt stock rose by 13.5% year-on-year (y/y) to ₦152.4 trillion as of the end of H1 2025. On a quarterly basis, however, the increase was more modest at about 2.0%.
A breakdown of the debt composition shows that domestic debt accounted for roughly 52.9% of the total, slightly higher than 52.7% in the previous quarter but marginally below the 53.0% recorded in the same period last year. Conversely, external debt made up 47.1% of the total in H1 2025, compared with 47.3% in Q1 2025. The overall uptick in public debt reflects continued borrowing by both federal and subnational governments.
External debt rose by 2.2% quarter-on-quarter (q/q) to US$47.0 billion at the end of Q2 2025. However, the relative stability of the Naira helped limit the impact on the external debt position when expressed in local currency terms. An exchange rate of approximately ₦1,529/US$ was used for debt conversion as of end-Q2 2025, compared to ₦1,536/US$ in the previous quarter. This modest appreciation of the currency kept the increase in the Naira value of external debt to just 1.7% q/q, bringing the total to ₦71.8 trillion. Meanwhile, domestic debt rose by 2.3% q/q and 13.1% y/y to ₦80.6 trillion by mid-2025, reflecting the government’s continued reliance on Treasury bills and FGN bonds to finance budgetary requirements.
We maintain our base-case expectation that Nigeria’s total public debt will continue to rise, reaching an estimated ₦160 trillion by the end of the year. This increase is projected to be driven by both external and domestic borrowings aimed at financing revenue shortfalls, particularly from the oil sector. The authorities are reportedly considering a US$2.3 billion Eurobond issuance, which could raise total external debt to around US$48.2 billion by year-end, after accounting for upcoming maturities. Concurrently, we expect the DMO to intensify domestic borrowing particularly at the long end of the yield curve, as investor appetite for
long-dated instruments improves amid moderating yields. Moreover, the updated domestic-to-external debt ratio target of 55:45 implies that, following the potential Eurobond issuance, further domestic borrowing will be necessary to maintain alignment with the prescribed debt composition.
Regarding debt sustainability, Nigeria’s debt profile remains within manageable limits, supported by the recently approved Medium-Term Debt Management Strategy (MTDS) 2024-2027 and the rebased Gross Domestic Product (GDP). Based on our full-year projections, the debt-to-GDP ratio is expected to settle at approximately 37%, well below the DMO’s self-imposed ceiling of 60% and the 70% threshold set by the IMF under its Market Access Country Debt Sustainability Framework. However, under stress-test scenarios such as weaker-than-expected GDP growth, a widening primary balance deficit, and heightened exchange rate pressures, the debt-to-GDP ratio could rise to around 42% over the medium term.
Click here to download full report: CSL Nigeria Daily – 13 October 2025 – Debt.pdf
