Experts worried over high cost of servicing Nigeria’s debt

…say citizens may pay for it through additional taxes

Economic experts have expressed concern over Nigeria’s rising debt profile which stood at N159.35 trillion at the first quarter (Q1) of 2026, and the high cost of servicing this debt.

According to report released by the Debt Management Office (DMO), as of March, 2026, Nigeria’s total public debt stock reached ₦159.35 trillion (equivalent to $114.95 billion) which reflects a year-on-year increase of ₦9.96 trillion (6.67%) from ₦149.39 trillion recorded in March 2025, driven by new domestic and external borrowings.

Speaking with Nigerian Tribune, an Economic Expert, Dr. Iyke Ezeugo, explained that domestic borrowing currently accounts for the lion’s share of the burden at ₦84.85 trillion (53.27%). However, the external debt—standing at $51.86 billion—is where the nation’s sovereignty is truly negotiated.

“Multilateral institutions hold a combined $23.85 billion, with the World Bank alone accounting for a staggering $19.89 billion. While these are the “cheapest” loans available (1-2% interest), they act as a rigid policy trap.

“To keep this liquidity flowing, Nigeria must strictly adhere to Washington-approved fiscal reforms—most notably, sustaining the painful removal of the petrol subsidy and allowing the Naira to float freely.”

He said bilateral loans stand at $6.72 billion, dominated entirely by the Export-Import Bank of China. Chinese debt funds visible mega-projects. However, these loans legally mandate that Chinese state-owned enterprises will be the sole contractors. China is securing guaranteed, dollar-denominated export contracts for its own industries, which Nigeria must repay over decades.

“The most controversial element of the domestic debt is the securitisation of the ₦23.9 trillion “Ways and Means” advances—money illegally printed out of thin air by the previous administration to cover shortfalls. The current administration formalised this liability into high-interest government bonds. Taxpayers are now paying premium interest rates to service the cost of past administrative incompetence.

“To understand why the debt feels so suffocating to the everyday citizen, we must pull back the curtain on the most volatile segment of the external ledger: Commercial Debt, which sits at $18.55 billion.”

IEzeugo stated further that “when the Nigerian government needs quick cash with no policy strings attached, it issues a ‘Eurobond.’ Despite the name, these are simply sovereign bonds issued in a foreign currency, typically US dollars.

“The buyers are not governments; they are ruthless international private investors—hedge funds, global asset managers, and foreign pension funds. Because Nigeria is viewed as a high-risk emerging market, these investors demand a steep premium. In late 2025, Nigeria issued a $2.35 billion Eurobond, agreeing to pay yields of 8.63% and 9.13%.

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Here is the mechanical trap: Nigeria “earns Naira, but must pay this 9% interest in Dollars. Every time the Naira devalues against the Dollar, the cost of servicing that debt mechanically explodes.

“If the government issues a $2 billion bond at 9%, it owes $180 million in interest annually. If the exchange rate is ₦500/$, that’s ₦90 billion. If the exchange rate crashes to ₦1,400/$, that exact same debt suddenly costs ₦252 billion to debt servicing.

“The government touts the oversubscription of these bonds as ‘investor confidence,’ but the reality is simpler: Wall Street loves high-yield debt backed by a sovereign nation’s tax base,” the economic expert noted.

He cautioned that “this massive borrowing directly bleeds into the real economy. For the 2026 fiscal year, Nigeria is projected to spend over ₦15.5 trillion just on servicing its debt. To find this staggering amount of Naira, the government borrows heavily from the domestic market,” Ezeugo lamented.

Also speaking to Nigerian Tribune, a political economist, Babajide Aladejobi, said statistics released to the public at present seem to suggest that the debt revenue to debt service ratio is in the region of about 50 to 65 percent, which is a significant improvement from previous years.

“But the truth is that there is still a lot of pressure being put on government finances and critical sectors of the economy continue to suffer. Sectors like infrastructure, industry and education continue to suffer because even at the range of 50 to 65% debt service ratio, there is very little revenue freedom for the provision of essential services by government.

“So, obviously it is still not a wholesome situation, and evidently, that is why the government seems to be widening its tax net by the promulgation of various tax laws aimed at bringing as many as possible into the net.”

The expert explained that as “we speak, there’s nobody who can speak to you with clarity about the extent of the scope of Nigeria’s tax laws because almost everything is now taxable. The result is that the citizenry continues to suffer from multiple taxation, instead of having a unified structure by which tax will be paid by the citizens.

“That is where the danger lies, the incoherent tax administration makes the entire system open to corruption. It makes auditing almost impossible, because you find so many structures, so many agencies are angling to collect taxes from the same population.

“The citizens are already feeling the pinch, and at the end of the day, the government itself is not likely to derive the benefit which it imagined that it will derive from the implementation of this new tax regime. So obviously, the government needs to go back to the drawing board.

“It needs to rejig the tax laws and the tax administration so that at the end of the day, the citizenry is not taxed to the bone marrow, which appears to be what is on the table,” he cautioned.

For Eric Igela, another expert, “Borrowing is not a bad thing so long as you see what the money is used for. However, when the money borrowed is not utilised for the primary purpose of the loan, future generations will be made to suffer and pay back these debts.”

It is reported that on March 31, 2026, the National Assembly approved President Bola Tinubu’s $6 billion external borrowing request, increasing the country’s debt profile.