The African Development Bank (AFDB) has sounded new alarms concerning the increase in Nigeria debt burden, warning that the country could spend up to 75% of its income on interest pays alone in 2025 – a level that risks stifling public spending and blocking economic recovery.
The warning is contained in the African economic perspectives of AFDB in 2025, which underline how countries with apparently manageable GDP ratios can always be confronted with unsustainable debt conditions when income is constantly low and the debt service costs increase sharply.
“Nigeria has a classic case. In 2025, the country’s public debt was projected at 47% of GDP.
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This last caution of the main institution for financing the development of Africa intervenes while the administration of President Bola Tinubu continues an aggressive borrowing program which could push the total public debt of Nigeria greater than 180 Billions of Nairas in the coming months.
The Tinubu administration said that it was looking for $ 21.5 billion in new external loans, as well as a 758 billion Nairas bonds and an additional $ 2 billion in domestic loans, to finance critical infrastructure projects and set up the inherited bonds such as pension arrears.
The government defended this decision, citing urgent national needs, in particular the financing of infrastructure gaps, the modernization of transport systems, the realization of energy projects and the fight against long -standing passives in the public sector as well as unpaid pensions. But experts warn that the extent of the proposed loan could considerably worsen the prospects for the country’s debt.
If they are approved and lowered, these installations – in particular the loans denominated in dollars – could catapult the total stock of Nigeria debt beyond 180 Billions of Nairas, against 144.7 Billions of Nairas, in December 2024, according to the debt management office (DMO).
Although AFDB acknowledges that the Nigeria debt / GDP ratio of 47% may seem lasting compared to certain advanced economies, it insists that the real concern lies in the country’s low income base, which leaves little room for tax maneuverability.
“The interests of the debt and the damping payments are not necessarily linked to the size of the GDP but are made from government revenues,” said the report, warning that such conditions can create a situation where governments are locked in reimbursement loans without sufficient funds for development or essential services.
The bank also noted that if some African countries have benefited from a decrease in debt ratios between 2022 and 2023 due to the favorable dynamics of interest growth, this trend is fragile and could easily reverse whether economic growth slows or whether global interest rates are increasing. “Imprudent budgetary behavior and excessive loans, in particular from commercial terms, could undermine progress,” he warned.
Foreign reserves under pressure from debt payments
New data from the Nigeria Central Bank (CBN) show that $ 2.01 billion was spent on the external debt service between January and April 2025, an increase of 50%, against $ 1.33 billion in the same period in 2024.
The debt service represented 77.1% of the total international payments made by the government in the first four months of 2025, against 64.5% during the corresponding period of the previous year. The outputs of global FX during the period amounted to $ 2.60 billion, reimbursement of external debt alone destroying a large part of the Nigeria dollar reserves.
The consequence is an increasing episode of other Critical needs of the FX, in particular commercial transactions, shipments of education, medical tourism and industrial imports. The country’s reserves were exhausted by $ 3 billion in just four months, largely to serve external maturation obligations.
Holders of future debts
Experts are more and more warning that the Tinubu administration recalibrates its budget strategy, Nigeria may fall into a debt trap, where new loans are simply used to refinance the old ones, leaving the country with little or no space for a real investment.
Already, the debt service / income ratio is among the highest in the world, and the cost of debt – both in nairas and foreign currencies – continues to raise. The devaluation of the Naira since the unification of the FX market in mid-2023 has further inflated the equivalent of the interior currency of the external debt of Nigeria, aggravating the reimbursement pressures.
The World Bank and the International Monetary Fund previously warned Nigeria to increase its domestic mobilization of income and reduce non -essential loans. Despite these warnings, the Tinubu administration maintains that the loan remains crucial to provide its infrastructure and well-being program.
Economists warn that in the short term, these ambitious borrowing plans if they were continued without additional budgetary reforms and transparent execution, could worsen the profile of the Nigeria debt, limit capital investment and write the already fragile recovery path of the economy.
