In a report recently made available by the Budget Office of the Federation, it was shown that the Federal Government debt repayments exceeded the amended budget allocation by N1.90tn in the first nine months of 2025.
The 2025 third quarter Budget Implementation Report showed that all debt-related payments, rose to N12.63tn between January and September, compared with the prorated budget provision of N10.74tn, representing an overrun of N1.90tn or 17.65 percent.
The report showed that debt servicing was by far the largest component, standing at N12.52tn in the first three quarters, against the prorated allocation of N10.45tn, representing excess spending of about N2.07tn or 19.8 per cent.
A breakdown of the debt servicing figures showed that domestic debt service gulped N6.23tn, exceeding its N5.39tn provision by N832.42bn. Foreign debt service also rose to N6.30tn, surpassing its N5.06tn allocation by N1.24tn.
These figures indicate that 67.2 per cent of the Federal Government’s retained revenue of N18.63tn was spent on debt service in the first nine months of 2025.
This means that for every N100 retained by the Federal Government between January and September, about N67 went into servicing debts, leaving roughly N33 for salaries, overheads, capital projects, transfers and other obligations.
This is clearly unsustainable. Nigeria’s pattern of debt servicing risks trapping it in a debt-service-first cycle (that is, if it is not trapped already), leaving little room for development. Continued reliance on borrowing risks a debt spiral, where the government borrows more borrow to cover existing obligations, and pay old debts rather than fund development. In such a scenario, debts grow faster than the economy, investors and lenders begin to lose confidence in the economy, which raise borrowing costs even further.
More problems that can be brought on by elevated debt servicing levels, include the risk that government may not the fiscal flexibility to respond to economic shocks brought by events like recessions, pandemics, commodity price swings etc. This would mean that government would be hindered in its ability to deploy stimulus packages during recessions, reverse downturns during commodity price declines, and invest in healthcare, vaccines, and social safety nets during pandemics. These situations if prolonged, would ultimately lead to rising unemployment and poverty which fuel frustration, protests, and insecurity.
I don’t think that I have to mention how such debt levels crowd out the building of infrastructure, causing roads, power, and transport projects to be delayed or abandoned. Weak infrastructure slows industrialization and discourages foreign investment, thus ultimately slowing job creation. With Nigeria’s population forecast to reach about 400 million by 2050, the combination of a youth bulge and insufficient job opportunities is a recipe for explosive social unrest.
Okay, enough scare-mongering. So what is the way forward? Simply put, Nigeria must increase revenue in order to be less dependent on debt financing. You are probably familiar with the typically proposed solutions. Broaden tax base, diversify exports, invest in human capital, cut wasteful spending, accelerate energy transition etc.
But how you may ask is Nigeria supposed to pursue all these measures in the face of its constrained finances brought on by elevated debt levels that these very measures are supposed to mitigate?
The trick is not simply “spend more,” but to restructure how resources are mobilized and allocated so reforms can happen even under fiscal stress. For instance, Nigeria can broaden its tax base by leveraging fintech and e-governance to capture informal sector activity without heavy upfront spending. It could also plug illicit financial flows and improve customs collection. These are measures that raise revenue without new borrowing.
To diversify exports, it could encourage private sector-led investment in agro-processing and manufacturing through incentives rather than direct government spending. Public-private partnerships (PPPs) could be leveraged to build infrastructure, and trade facilitation reforms could reduce bottlenecks and improve the ease of doing business.
On the issue of human capital, international donor and multilateral support could be leveraged such that education and health programs could be co-financed by development partners. It could also encourage community-driven initiatives by empowering local governments to deliver services more efficiently.
Wasteful spending could be reduced through audit and transparency reforms. These could leverage the use of IT to track government expenditures and payroll.
Acceleration of energy transition can be pursued in a number of ways. Private capital could be mobilized for renewable energy projects, if regulatory frameworks are clear and encouraging. Another option is the scaling up of the deployment of decentralized solutions like solar mini-grids and off-grid systems. These require less state capital than conventional power plants. International climate financing to support green projects have become increasingly available. These could be tapped by the government without straining its budget.
Nigeria’s debt threat should call for concern among well-meaning Nigerians. As troubling as the figures are, I hope I have been able to that there are viable options out of the debt morass.
