Nigeria’s public debt trajectory is raising significant concerns among financial analysts at Afrinvest, who predict a potential surge to N180 trillion by the end of 2025 if current fiscal trends persist. This alarming projection, detailed in Afrinvest’s latest Weekly Market Report, stems from an analysis of the World Bank’s Nigeria Development Update and recent data from the National Bureau of Statistics. While acknowledging improvements in Nigeria’s macroeconomic environment due to reforms in foreign exchange, monetary policy, and fiscal management, Afrinvest cautions that the sustainability of these gains is precarious. The firm points to the dual pressures of weak oil earnings and escalating expenditure as potential triggers for fiscal instability, potentially driving budget deficits beyond N17 trillion and consequently inflating the total debt stock.
A critical factor contributing to this projected debt surge is the underperformance of the oil sector. Crude oil production, averaging 1.49 million barrels per day as of April 2025, remains significantly below the budgeted benchmark of 2.06 million barrels per day. Furthermore, prevailing crude oil prices, hovering around $64 per barrel, fall short of the $75 per barrel projection. This combined shortfall in production and pricing could result in a substantial 37.9% deviation from the anticipated N19.5 trillion oil revenue, placing immense strain on government finances. The reliance on oil revenue, coupled with its inherent volatility, underscores the vulnerability of Nigeria’s fiscal position to external shocks and fluctuations in global oil markets.
Despite these challenges, the report acknowledges positive developments in 2024, including a $6.8 billion balance of payments surplus and a remarkable 110% year-on-year increase in foreign portfolio inflows, reaching $13.4 billion. This influx of capital is attributed to the Central Bank of Nigeria’s hawkish monetary policy, characterized by a cumulative 875 basis points increase in the Monetary Policy Rate to 27.50% and the issuance of over N10.2 trillion in Open Market Operations bills. These measures successfully attracted investor interest, bolstering foreign investment in the Nigerian economy. Additionally, gross revenue collection witnessed substantial growth, estimated to have risen from N16.8 trillion in 2023 to N31.9 trillion in 2024, an impressive 89.9% increase. This significant boost in revenue collection is largely attributed to increased Value Added Tax collections and windfall gains from foreign exchange-denominated oil receipts following the liberalization of the exchange rate.
However, the persistent challenge of inflation continues to cast a shadow over Nigeria’s economic outlook. While headline inflation eased to 23.7% in April 2025 following the rebasing of the Consumer Price Index, the World Bank projects an annual average of 22.0% for 2025. This projection suggests that inflationary pressures, although moderating due to the high base effect and tight monetary policy, remain a significant concern. The sustained high inflation erodes purchasing power, undermines consumer confidence, and poses a threat to overall economic stability.
The Afrinvest report emphasizes the urgency for the Federal Government to consolidate the economic gains achieved thus far and implement sustainable growth frameworks. The removal of subsidies on Premium Motor Spirit (PMS), electricity, and foreign exchange has created a crucial window of opportunity for the government to prioritize critical infrastructure development, enhance security to boost agricultural productivity, curb crude oil theft to meet production targets, and implement measures to reduce the cost of governance. These strategic interventions are essential to mitigate the risks associated with the rising debt burden and ensure long-term fiscal sustainability.
The report’s recommendations underscore the need for a multi-pronged approach to address Nigeria’s economic challenges. Investing in infrastructure development is crucial for stimulating economic growth, creating jobs, and improving the overall business environment. Addressing insecurity, particularly in the agricultural sector, is essential to unlock the sector’s full potential and ensure food security. Curbing crude oil theft, a major drain on government revenue, requires strengthened security measures and improved transparency in the oil sector. Finally, reducing the cost of governance through prudent fiscal management and enhanced accountability is vital for optimizing resource allocation and promoting fiscal discipline. By implementing these measures, the government can lay the foundation for sustainable economic growth and address the pressing issue of rising public debt.
