Nigeria’s public debt rose by N14.61tn in 2025 — DMO

Nigeria's public debt trajectory has entered dangerous territory. The Debt Management Office confirmed that total public debt surged by N14.61 trillion during 2025, reaching N159.28 trillion—a 10.1% year-on-year increase that underscores the West African giant's deepening fiscal challenges. For European investors with exposure to Nigerian assets, government bonds, or subsidiaries operating in the country, this represents a critical inflection point requiring immediate portfolio reassessment.

To contextualise this figure: Nigeria's debt-to-GDP ratio now stands at approximately 37-40%, depending on the latest GDP revision. While this remains below the 60% threshold that typically triggers sovereign credit downgrades, the velocity of debt accumulation is alarming. The N14.61 trillion increase in a single year suggests the government is borrowing at an unsustainable rate to service existing obligations, fund capital projects, and cover budget deficits arising from fuel subsidy reforms and currency devaluation pressures.

The structural drivers of this debt crisis are well-documented. Nigeria's oil-dependent revenue model has been undermined by production constraints (averaging 1.5-1.8 million barrels per day, well below the 2.2 million bpd target). Simultaneously, the naira has depreciated by over 40% against the US dollar since 2021, making foreign-denominated debt servicing exponentially more expensive. The Central Bank of Nigeria's monetary tightening cycle—with benchmark rates now above 27%—has increased the cost of domestic borrowing, creating a vicious cycle where higher interest payments necessitate even more borrowing.

For European investors, the implications are multifaceted. First, Nigerian government bonds (particularly Eurobonds maturing post-2028) face repricing risk. The spread between Nigerian Eurobonds and German Bunds has already widened significantly, reflecting elevated default risk. Second, currency risk is acute: any further naira depreciation will erode returns for European equity investors in Nigerian-listed companies. Third, local subsidiary profitability is under pressure. Companies operating in Nigeria face higher financing costs, squeezed consumer purchasing power due to inflation, and potential policy volatility as the government scrambles to stabilise debt dynamics.

The government's response will be critical. Market expectations favour continued IMF engagement (the recent Extended Credit Facility programme provides a roadmap) and potential fiscal consolidation measures, including further subsidy reductions and tax reforms. However, political constraints limit the pace of adjustment. Presidential elections in 2027 create a window where the government may prioritise growth stimulus over austerity, potentially worsening fiscal metrics before they improve.

European investors should note that while Nigeria remains Africa's largest economy with demographic advantages and significant energy transition opportunities, the debt burden now represents a material headwind. The risk premium embedded in Nigerian asset prices may not yet fully reflect the trajectory of public liabilities. This creates both a warning signal and, for sophisticated investors with high risk tolerance, potential opportunity if the government credibly commits to fiscal discipline.

The N159.28 trillion figure is not merely a number—it reflects the shrinking policy space available to Nigerian policymakers and the rising tail-risk of external pressure or credit event scenarios in the medium term.