When FX Blew Up Nigeria’s Debt Numbers

Nigeria’s rising debt figures mask a deeper reality driven largely by naira devaluation, FX volatility, and long-hidden liabilities, writes Festus Akanbi

Nigeria’s rising debt profile has again returned to the center of economic debate, but beneath the frightening headline figures lies a more complicated story shaped by exchange-rate volatility, inherited liabilities, weak revenue generation, and rising borrowing costs, rather than by reckless accumulation of fresh loans.

The controversy followed revelations that Nigeria’s total public debt rose from about N49.8 trillion in March 2023 to nearly N159.2 trillion by December 2025, triggering fears that the country may be drifting towards a debt crisi. Yet economists insist that much of the increase was driven by the sharp devaluation of the naira and the formal recognition of long-existing obligations.

A report by The Briefing – Macro & Markets argued that the dramatic rise created a misleading impression that Nigeria had accumulated massive new debt in a short period. According to the report, when measured in dollar terms rather than naira, NNigeria’stotal debt only rose slightly from about $108.2 billion in March 2023 to roughly $110.9 billion by December 2025.

That distinction has become central to the debate. Following the foreign exchange reforms introduced in 2023, the naira weakened sharply from around N460/$ to nearly N1,500/$ by late 202. The immediate consequence was that the naira value of NNigeria’sforeign currency obligations ballooned automatically, even without substantial fresh borrowing.

Analysts estimate that nearly N43 trillion was added to the debt stock purely through exchange-rate revaluation. Dollar-denominated obligations that previously appeared manageable suddenly translated into far larger naira liabilities once the exchange rate adjusted.

The debt profile was further inflated by the securitisation of almost N30 trillion in Ways and Means advances owed to the Central Bank of Nigeria (CBN. Those obligations had existed outside the formal debt register for years before being officially recognised and converted into tradable debt instruments.

Economic analysts say the move improved transparency but instantly expanded the ccountry’srecorded debt stock.

The issue dominated discussions on ARISE News last week, with analysts arguing that public debate was increasingly driven by sensational headline figures rather than a proper understanding of the debt composition.

One analyst noted that while the N159 trillion figure looked alarming, the real concern was NNigeria’sweak revenue base and rising debt servicing costs.

“That matters is not just the amount you owe, but your capacity to repay,””the analyst said. ““f more than half of government revenue is going into debt servicing, development spending inevitably suffers.””That concern has become increasingly difficult to dismiss. NNigeria’sdebt service-to-revenue ratio remains among the highest globally, despite the ccountry’srelatively moderate debt-to-GDP ratio compared with several advanced economies.

President Bola Tinubu acknowledged that a substantial portion of federally generated revenue is now consumed by debt service, leaving less fiscal space for infrastructure, healthcare, education, and social investments.

Analysts also noted that many of the loans now putting pressure on public finances were contracted years before the current administration. Several external facilities, including Chinese infrastructure loans secured between 2016 and 2019, came with moratorium periods under which Nigeria initially paid only interest before principal repayments commenced.

With many of those repayment windows maturing under the present administration, fiscal pressures have intensified sharply.

Still, critics insist that the current government cannot completely distance itself from the consequences of the naira devaluation, which magnified the debt burden in local-currency terms.

“Then people say debt increased because of exchange-rate devaluation, they should also admit that the devaluation itself worsened the debt burden,”another analyst observed during the ARISE discussion.

Beyond technical arguments over debt ratios, many Nigerians remain unconvinced because they see no visible improvements in living standards despite years of borrowing.

Several economists questioned the productivity of government spending, arguing that excessive recurrent expenditure, policy inconsistency, and perceived elite extravagance continue to weaken public confidence in fiscal management.

“Nigerians are asking a simple question: what exactly are we doing with the money?””an economist said. ““eople see worsening inflation, unemployment, and hardship while government officials continue to live lavishly.””The debate has also exposed deeper structural weaknesses in NNigeria’seconomic management framework. While the Debt Management Office continues to insist that the ccountry’sdebt remains sustainable by international standards, concerns persist over transparency, leakages, and poor revenue mobilisation.

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has repeatedly defended the ggovernment’sposition, arguing that debt sustainability should be assessed using internationally recognized indicators rather than relying on nominal debt figures alone.

According to him, NNigeria’sdebt-to-GDP ratio stood at about 36.1 percent in 2025, significantly below the global average of over 90 percent and far below ratios recorded in countries such as Japan and the United States.

Oyedele maintained that much of Nigeria’s debt Nigeria’snated in local currency, reducing exposure to external repayment shock. However, he acknowledged concerns over the crowding-out effect of government borrowing on private-sector investment.

Many economists now believe the larger danger lies not in the size of the debt stock itself but in the rapidly increasing cost of servicing it.

Following the CBN’s aggressive monetary tightening to combat inflation and stabilize the naira, interest rates surged sharply between 2023 and 202. Treasury bill yields and bond rates rose above 20 percent at different points, significantly increasing government borrowing costs.

Consequently, debt servicing obligations have continued to absorb a growing share of federally collected revenue.

The Nigerian Economic Summit Group (NESG), in its recent Debt Burden Monitor, warned that beneath the apparent stability of conventional debt indicators, fiscal vulnerabilities remained elevated. The group projected that Nigeria’s debt stock coNigeria’stowards N200 trillion in the medium term if structural reforms fail to strengthen government revenues and reduce persistent fiscal deficits.

Former President of the Nigerian Bar Association, Olisa Agbakoba, also warned that continued borrowing without deeper institutional reforms could worsen Nigeria’s fiscal outlooNigeria’sticized weak revenue collection systems and the practice of some government agencies deducting operational costs before remitting funds to the Federation Account.

“The issue is not just borr”wing,” Agbakoba argues. “The big”er problem is leak”ges, inefficiency, and poor fiscal discipline.”

Faced with mounting fisca” pressures, the Tinubu administration has increasingly shifted attention towards tax reforms as a long-term solution to Nigeria’s chronic revenue wNigeria’sStill, analysts argue that reforms alone may not ease public anxieties unless citizens see visible improvements in infrastructure, jobs, electricity supply, and living conditions.

For investors and development partners, the central issue is no longer whether Nigeria’s debt figures appeNigeria’sening in nominal terms, but whether Africa’s largest economy caAfrica’sa resilient revenue system capable of supporting growth without perpetual dependence on borrowing.

While economists remain divided over the severity of Nigeria’s debt situation, aNigeria’sconsensus appears to be emerging: Nigeria’s long-term fiscal Nigeria’sility will depend less on the size of its debt and more on the quality of economic management, revenue reforms, and the productive use of public resources.