Nigeria's Public Debt to Hit N160.6 Trillion by Year-End, Raising Fiscal Alarm
A new economic outlook report by CSL Stockbrokers Limited, a subsidiary of FCMB Group Plc, indicates that Nigeria's total public debt is projected to surge to N160.6 trillion by the end of 2025. This forecast has raised significant concerns about the nation's increasing fiscal vulnerability and the sustainability of its debt burden.
Here's a more detailed look at the report's findings and the implications:
Key Projections and Current Debt Status:
Forecasted Debt: CSL Stockbrokers' H2 2025 economic outlook predicts that Nigeria's public debt will reach at least N160.6 trillion by December 2025. This figure would represent approximately 50.2% of the pre-rebased Gross Domestic Product (GDP).
Current Debt Level: As of March 31, 2025 (Q1 2025), Nigeria's total public debt stood at N149.39 trillion, according to the Debt Management Office (DMO). This marked a significant year-on-year increase of N27.72 trillion (22.8%) compared to March 2024.
Driving Factors: The anticipated increase is primarily attributed to the Federal Government's need to borrow an additional N9.3 trillion or more in the second half of 2025 to fund its widening fiscal deficit.
Concerns and Fiscal Vulnerability:
Widening Fiscal Deficit: Nigeria had projected a budget deficit of 3.9% of GDP in its 2025 budget. However, CSL Stockbrokers forecasts that the actual deficit could widen to 5.8% of GDP due to shortfalls in both oil and non-oil revenue.
Revenue Underperformance: The report highlights that the government's fiscal position remains fragile, with oil revenues underperforming expectations and planned tax reforms facing delays. This makes it challenging to contain the growing fiscal deficit and increases reliance on borrowing.
Debt-to-GDP Ratio vs. Sustainability: While the recent GDP rebasing exercise might make Nigeria's debt-to-GDP ratio appear lower (around 50.7% by the end of 2025), analysts at CSL emphasize that this "cosmetic improvement" does not mask underlying concerns about debt sustainability. They warn that without meaningful revenue growth, the underlying issues persist.
High Debt Servicing Costs: The cost of servicing Nigeria's burgeoning debt is a major concern. The 2025 budget allocates a significant portion of its expenditure to debt servicing. Some analysts have described the increase in debt servicing from N8 trillion in 2024 to N16 trillion in 2025 as a "red flag," as it crowds out funding for critical sectors like infrastructure, education, and healthcare. The African Development Bank (AfDB) has also flagged that Nigeria is projected to spend 75% of its revenues on interest payments in 2025, indicating severe fiscal strain.
Exchange Rate Impact: The depreciation of the Naira significantly inflates the Naira equivalent of external debt, making servicing costs much higher and adding further strain to national reserves. The Naira weakened drastically from approximately N770/$ in June 2023 to around N1,550/$ in July 2025, effectively nearly doubling the Naira value of external debt.
Implications of Rising Debt:
Reduced Fiscal Space: A large portion of government revenue being dedicated to debt servicing leaves minimal fiscal space for essential public services and crucial investments needed for long-term growth and social development.
Crowding Out Private Investment: High debt levels can lead to higher interest rates, as investors demand a risk premium. This makes borrowing more expensive for both the government and the private sector, potentially crowding out private investment that is vital for economic growth.
Macroeconomic Instability: Elevated public indebtedness can lead to macroeconomic instability, including inflationary pressures and a depreciating currency.
Vulnerability to Shocks: A high debt burden makes the economy more vulnerable to external shocks, such as global downturns in oil prices or changes in international interest rates.
Recommendations:
Experts and international bodies like the IMF have urged Nigeria to:
Enhance revenue mobilization through efficient tax administration and restructuring revenue agencies.
Optimize expenditures and unlock potential in non-oil sectors like solid minerals.
Implement prudent debt management strategies.
Adopt a neutral fiscal stance to safeguard macroeconomic stability while maintaining crucial investments.
The trajectory of Nigeria's public debt highlights a critical fiscal crossroads for the Tinubu administration, emphasizing the urgent need for sustainable revenue generation and disciplined fiscal management.
I'm Aisha shehu
Talksocialtalka News
