Market News

IN the fluorescent-lit trading rooms of Lagos Island, where currency traders watch the naira flicker like a faulty neon sign, the numbers no longer shock. Nigeria’s total public debt hit N159.28 trillion — roughly $110.98 billion — by December 31, 2025. That is a 10.10 percent jump from N144.67 trillion a year earlier and a 4 percent rise from the N153.3 trillion recorded at the end of September. On paper, it looks manageable. The debt-to-GDP ratio sits at a seemingly prudent 30.8 percent, well below the 60 percent threshold in the Medium-Term Debt Strategy.

Yet, the calm is deceptive. This figure excludes quasi-fiscal liabilities — the hidden debts of the Asset Management Corporation of Nigeria (AMCON), unresolved power-sector obligations, and mountains of contractor arrears — which analysts say push the true exposure far higher. The real crisis is not the stock of debt but the haemorrhage of servicing it. In 2025 alone, domestic debt service swallowed N8.61 trillion, while external obligations added another $5.15 billion. For 2026, the budget projects N36.9 trillion in revenue against N15.8 trillion in debt payments — a ratio of 42.9 percent, improved from 2025’s estimated 65 percent but still a straitjacket on capital spending and social services.

“Looking ahead, Nigeria’s debt level is expected to continue rising in the near term, due to ongoing fiscal deficits, infrastructure financing needs, and relatively weak revenue generation,” analysts at Johnson Chukwu-led Cowry Assets Management Limited wrote in a client note last weekend.

“However, the key concern is not just how much the country owes, but how easily it can meet its repayment obligations. Exchange rate volatility remains a major risk for external debt, while tight monetary conditions could keep domestic borrowing costs elevated.”

In the grand theatre of global finance, debt has become both instrument and illusion — an indispensable tool for development and, increasingly, a silent architect of vulnerability. Global public debt has ballooned from $19.7 trillion in 2000 to $111 trillion in 2025. Governments now dominate the ledger. The United States and China alone account for more than half: $38.3 trillion and $18.7 trillion, respectively. Their borrowing financed highways, factories, vaccines and semiconductors. Their economies, diversified and institutionally robust, absorb the load.

Africa tells a different story.

Ten countries shoulder 72 percent of the continent’s public debt. Egypt leads with $348 billion, South Africa follows at $306 billion. Nigeria’s tally — between $99 billion and $113 billion — appears modest by comparison. But size, as Baba Yusuf Musa insists, is the wrong metric.

“Africa is not one economy,” says Musa, Director-General of the West African Institute for Financial and Economic Management, in a widely cited policy brief. “It is 54 sovereign nations with 54 different GDPs, tax bases, currencies, export profiles and repayment capacities. Aggregating their debts and ranking them by size is the financial equivalent of comparing a billionaire’s mortgage to a teacher’s personal loan.”

Debt, Musa argues, is meaningless in isolation. What matters is capacity — the ability to generate revenue, service obligations and sustain growth. Nigeria’s capacity is fraying.

Domestic debt, at N84.85 trillion or 53.27 percent of the total, is largely federal borrowing through bonds and treasury bills.

“This form of borrowing is relatively easier to access but comes at a cost, especially in a high-interest rate environment,” Cowry Assets noted. External debt — N74.43 trillion, or 46.73 percent — mixes concessional loans from the World Bank and African Development Bank with costlier commercial Eurobonds. Currency swings turn every dollar of repayment into more naira than budgeted.

The 2026 budget offers a glimpse of the squeeze. Debt service will consume nearly 43 percent of revenue, crowding out roads, hospitals and schools. “In simple terms,” Cowry analysts wrote, “a large share of what the government earns is already committed before new spending decisions are made.”

Tope Fasua, Special Adviser to the President on Economic Affairs, defends borrowing as national leverage. “Leverage is important in this world,” he notes. “Our ‘cash for everything’ mentality may be good personally, but nationally it is a drawback.” Yet critics counter that leverage without revenue growth is simply deferred pain.

The deeper fracture is revenue. Nigeria’s tax-to-GDP ratio hovers between 10 and 12 percent — among the world’s lowest. Oil, still the fiscal lifeline, is notoriously volatile. Prices swing with OPEC decisions, Middle East tensions and the accelerating global shift to renewables. When crude revenues dip, debt payments do not. The result is a structural imbalance that turns moderate borrowing into a potential trap.

Currency risk compounds the problem. Much of the external debt is dollar-denominated. As the naira weakens — a trend sharpened by forex liberalisation and import pressures — the local-currency burden swells. Nigeria earns in a depreciating currency and repays in appreciating ones. Future generations inherit the bill without the assets.

Abiodun Popoola, an academic at Ahmadu Bello University, is blunt about where the money goes. “The government does not need to be borrowing to sustain distortionary expenditures,” he argues. “Much of these things are what we borrow to fund… and they accumulate to throw the budget into deficit.”

He questions programmes that borrow at interest to lend at zero or fund consumption rather than productive infrastructure. “Should one borrow at interest to lend at no interest?”

Nigeria’s experiments with non-traditional financing have raised fresh alarms. Collateralised loans, including structures such as Total Return Swaps, tie up government assets as security.

 Uche Uwaleke, President of the Capital Market Academics Association of Nigeria, warns of the signal this sends. “A shift towards secured borrowing… is often seen as a negative signal by existing creditors. It may affect investors’ appetite.” Secured creditors gain priority in any restructuring, reducing flexibility and potentially raising future borrowing costs.

The global environment is unforgiving. Emerging markets face more than $9 trillion in debt redemptions in 2026. Interest rates remain elevated. Global growth, forecast at 3.3 percent, is too anaemic to outpace rising debt ratios. In this tightening squeeze, Nigeria’s margin for error has all but vanished.

Yet some officials still speak of “fiscal space”. They point to the debt-to-GDP ratio and argue Nigeria can borrow more. Critics call the claim dangerously simplistic. “Debt is not a badge of modernity,” one analyst observed. “It is a tool whose legitimacy depends on how efficiently it is deployed. Other nations borrow to build; Nigeria borrows to survive. That distinction is damning.”

Professor Sheriffdeen Tella, a leading economist, offers a measured path forward. “Loans are not bad,” he says. “But balancing debt leveraging with prudent management is key.”

The priorities are clear: broaden the tax base through compliance and non-oil revenue; diversify the economy beyond crude; direct every borrowed naira toward projects that generate returns; strengthen institutions against leakages; and maintain fiscal discipline even in election years.

Recent reforms in revenue collection and the foreign-exchange market are steps in the right direction, Cowry analysts concede, “but sustaining these gains will be crucial.

“Over time, a balance between prudent borrowing, stronger revenues, and disciplined spending will determine whether Nigeria’s debt remains manageable or becomes a more significant constraint on economic growth.”

The final layer of unease surrounds recent Gulf financing. A $5 billion facility secured through collateralised arrangements has drawn sharp private commentary. One analyst, speaking on condition of anonymity, described it as “too sweet today, too bad tomorrow.” He added: “By the time we start struggling to repay the loan, we will also struggle to point to the value it created. It’s a tradition that time has not been benevolent enough to change.”

In the end, Nigeria’s debt story is not about trillions or ratios. It is about choices. Borrow to build power plants that light factories, or borrow to patch consumption gaps? Diversify revenue before the next oil-price crash, or hope the next windfall will arrive in time? The quiet crisis beneath the global borrowing boom is that Nigeria is not yet overwhelmed by what it owes — it is overwhelmed by what it earns, and by how it spends what it borrows.

The numbers will keep rising. The question is whether policy will finally catch up. As Baba Yusuf Musa reminds the continent: the most important question in any debt conversation is not who owes the most, but who is least equipped to repay. For Nigeria, that question is no longer theoretical. It is urgent. It is consequential. And the answer, written in every naira diverted from schools to interest payments, will shape the country’s next decade.