Nigeria’s mounting public debt amid drastic plunge in foreign direct investment remains a disturbing trend in the country’s fledging economy, according to finance and economy experts.
Nigeria’s total public debt rose to N149.39 trillion as of March 31, 2025, marking a year-on-year increase of N27.72 trillion or 22.8 percrent when compared to the N121.67 trillion recorded in the corresponding period of 2024.
The latest figures from the Debt Management Office (DMO) also indicate a quarter-on-quarter increase of N4.72 trillion or 3.3 percent from N144.67 trillion as of December 31, 2024.
This consistent upward trajectory in Nigeria’s debt stock reflects both fresh borrowings and the impact of a depreciating exchange rate on external debt obligations.
The surge comes amid ongoing fiscal pressures, rising revenue, and continued dependence on both local and foreign borrowing to fund the national budget. The bogus budget filled with unnecessary expenditure items that do not drive production is also a major concern.
According to the DMO data, Nigeria’s external debt as of March 31, 2025, stood at N70.63 trillion ($45.98 billion), a significant jump from N56.02 trillion ($42.12 billion) in the same period in 2024.
This represents a year-on-year increase of N14.61 trillion or 26.1 percent . In quarter-on-quarter terms, external debt rose modestly from N70.29 trillion in December 2024 — a marginal increase of N344 billion or 0.5 percent.
However, while the dollar-denominated debt rose by $3.86 billion year-on-year, the much steeper increase in naira terms highlights the underlying impact of foreign exchange depreciation on Nigeria’s external liabilities.
The Central Bank of Nigeria (CBN)’s official exchange rate used for converting debt in Q1 2024 was N1,330.26 per US dollar. Although the specific rate for Q1 2025 was not disclosed, the growing gap in naira terms points to a weakened exchange rate, which directly amplifies Nigeria’s repayment obligations on its dollar and euro-denominated loans.
External debt obligations include borrowings from multilateral institutions such as the World Bank and the African Development Bank, bilateral sources, and commercial creditors, including Eurobond investors. The burden of servicing these debts in naira terms has become heavier as the local currency continues to slide in value. This trend could deepen if reforms aimed at stabilising the currency do not yield the desired results.
Similarly, the domestic component of Nigeria’s debt also maintained an upward trend, reaching N78.76 trillion ($51.26 billion) at the end of March 2025.
This reflects a year-on-year increase of N13.11 trillion or 20 percent from N65.65 trillion ($49.35 billion) in March 2024. On a quarterly basis, domestic debt rose by N4.38 trillion or 5.9 percent, up from N74.38 trillion in December 2024.
The report further disclosed that the Federal Government alone accounted for N74.89 trillion of this total, while the 36 states and the Federal Capital Territory (FCT) jointly held N3.87 trillion. However, state-level domestic debt declined slightly from N3.97 trillion in Q4 2024 and from N4.07 trillion in Q1 2024, to reach N3.87 trillion by the end of Q1 2025.
The reduction reflects improved debt repayment efforts by sub national governments, largely supported by higher inflows from the Federation Account Allocation Committee (FAAC).
Domestic borrowing typically consists of government securities such as Treasury Bills, FGN Bonds, Sukuk, and Green Bonds.
These instruments are used to plug the country’s fiscal deficit and are generally seen as safer from exchange rate risk, although they come with their own interest cost burdens. Many banks and institutional investors like the Pension Custodians have increasingly invested in this area.
As of the first quarter of 2025, the composition of the total public debt showed a near-even split, with domestic debt accounting for 52.7 percent and external debt making up 47.3 percent. This represents a slight shift from the structure recorded in March 2024, when domestic debt had a higher share of 54 percent while external debt stood at 46 percent
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The rising share of external debt — especially in naira terms — underlines the currency risk that Nigeria faces with continued reliance on foreign borrowing. At the same time, the consistent increase in domestic debt signals the government’s efforts to raise funds from the local capital market, despite concerns about high debt servicing costs and crowding out of private investment.
Nigeria’s public debt trajectory continues to raise questions about fiscal sustainability named sharp decline in foreign direct investment. With the total debt stock nearing the N150 trillion mark, concerns persist over the rising cost of debt servicing, which now consumes a significant share of the national budget.
According to the latest CBN’s Balance of Payment report, foreign direct investment (FDI) inflows into Nigeria declined by 19 percent to $250 million in Q1 2025, compared to $310 million in the previous quarter.
While the figure marks a quarter-on-quarter contraction, it represents a recovery from the net divestment of $310 million recorded in Q1 2024, signalling a fragile return of investor confidence in the country’s long-term prospects.
The decline in Q1 2025 reflects a broader slump in capital inflows, with portfolio investments suffering an even sharper reversal. Overall, the financial account came under pressure, weakening Nigeria’s external position despite a current account surplus and positive trade performance.
The CBN report shows that Nigeria’s financial account balance fell to $7.58 billion in Q1 2025, slightly down from $7.82 billion in Q4 2024. The moderation was largely driven by a dramatic swing in portfolio investment liabilities—from a robust $5.61 billion inflow in Q4 2024 to a net outflow of $5.03 billion in the first quarter of 2025. This $10.6 billion reversal in portfolio investment signals an erosion of foreign investor appetite for short-term Nigerian instruments such as CBN bills and government securities.
This trend was also evident in other categories of capital movement. “Other investment” liabilities, typically reflecting loans and deposits from non-residents, declined sharply from $13.89 billion to $4.32 billion. Direct investment assets—indicating Nigerians investing abroad—also reversed into a net outflow of $550 million, suggesting increased offshore diversification by domestic investors.
The significant capital outflows highlight the effects of ongoing exchange rate volatility, persistent inflation, and lingering uncertainty over monetary and fiscal policy alignment—all of which have made Nigerian assets less attractive to global investors.
A financial analyst, Dr Brendan Akoma, noted that the Nigerian economy is awash with Naira that is not supported by a concrete production base. “We still rely deeply on the export of oil and despite the massive intervention by the Dangote Refinery, we still import petroleum products. We cannot avoid the economic shock arising from this obvious paradox in a ‘wealthy’ nation,” Akoma said.
An economist, Dr Pamela Obioma noted that there is no discipline on the fiscal policy side. She said that while the monetary policy side struggles to bring the economy into the path of stability and sanity, the fiscal policy aspect is not interested in what happened to the economy.
“Look at how the National Assembly is padding the budget with unproductive items that depict a rush to grab wealth by the lawmakers and other government officials. No country makes progress this way. With ballooning debt profile and high inflation, the government will continue to spend a huge chunk of the nation’s resources on debt servicing while the economy totters on a weak productive base. This is why I am not enthusiastic about the recent tax reforms because it is only going to create more money for the government officials and the politicians,” she said in a telephone chat.
