MARKET NEWS

By : Priscilla Iwedike

Nigeria’s debt profile is tilting more heavily inward, as fresh data from the Debt Management Office shows a sharp rise in domestic debt servicing, now outpacing external obligations by a significant margin.

Total debt servicing climbed to N15.81tn in 2025, up from N12.83tn in 2024 — a 23.2 per cent increase driven largely by rising interest payments on local borrowings.

At the heart of the surge is domestic debt servicing, which jumped by 46 per cent to N8.61tn, accounting for over half of the country’s total debt service. This marks a notable shift from 2024, when external debt held a larger share of the burden.

The figures point to a growing reliance on local borrowing instruments, particularly Nigerian Treasury Bills, where interest payments more than tripled within a year.

 Treasury bill costs rose sharply from N747bn in 2024 to N2.55tn in 2025 — a spike that signals increasing short-term borrowing and higher refinancing pressures.

Federal Government bonds remained the largest single cost component, with interest payments rising to N5.35tn.

However, their share of total domestic interest declined, reflecting the faster growth of Treasury bill obligations.

A closer look reveals that interest payments continue to dominate Nigeria’s domestic debt structure, accounting for nearly 96 per cent of total servicing costs. In contrast, actual repayment of borrowed funds remains minimal, with principal repayments contributing just over four per cent.

On the external front, debt servicing rose modestly to $5.15bn in 2025. In naira terms, this translates to about N7.39tn, reflecting a slower growth rate compared to domestic obligations.

Unlike domestic debt, external servicing shows a more balanced structure between principal and interest payments.

Commercial debt — particularly Eurobonds — remains the biggest external pressure point, accounting for nearly half of total external repayments.

Multilateral institutions such as the World Bank and the International Monetary Fund also featured prominently in the country’s debt obligations.

The data underscores a broader fiscal concern: Nigeria is spending more to service its debts than to invest in development.

Reports indicate that debt servicing exceeded capital expenditure by N3.9tn within the same period, tightening the government’s spending space.

Economic analysts have warned that the rising cost of borrowing could continue to strain public finances. Programme Manager at Heinrich Böll Stiftung, Ikenna Ofoegbu, noted that a large portion of government revenue is still being channelled into debt servicing, despite a slight improvement from previous years.

Beyond the numbers, development experts are drawing attention to the real-world consequences.

Folahan Johnson of the Centre for Inclusive Social Development stressed that the impact of rising debt goes beyond fiscal metrics, affecting access to education, healthcare, and basic social services.

With borrowing projections for 2026 already revised upward, concerns are mounting over sustainability, transparency, and the long-term implications of Nigeria’s growing debt burden.