Rising sovereign debt signals growing fiscal strain –LCCI

My Merit Ibe          

The Lagos Chamber of Commerce and Industry (LCCI) has raised concerns over Nigeria’s escalating public debt, warning that it reflects increasing fiscal pressure on the economy and calling for more realistic policy measures.

Nigeria’s total public debt rose to N159.28 trillion as of December 31, 2025, marking a year-on-year increase of N24.98 trillion, or 18.6 per cent, from N134.30 trillion recorded in 2024. The chamber noted that the continued rise is driven by fresh borrowings to finance fiscal deficits, alongside the impact of exchange rate depreciation on external debt.

According to LCCI, the country’s debt-to-GDP ratio increased moderately to about 41.5 per cent in the fourth quarter of 2025, up from 40.87 per cent in the second quarter. While this remains within acceptable thresholds, it said the upward trend highlights mounting fiscal vulnerabilities, particularly as debt-service and debt-to-revenue ratios remain at uncomfortable levels.

The chamber also referenced assessments by the World Bank, which attribute Nigeria’s rising debt profile to structural weaknesses in revenue generation and persistent expenditure pressures.

Although a potential oil revenue windfall in 2026 could provide some relief, LCCI cautioned that its impact may be limited without disciplined fiscal management, noting that previous oil booms have not consistently translated into long-term fiscal stability.

Data from the Debt Management Office (DMO) shows that domestic debt climbed to N84.85 trillion by the end of 2025, a 3.7 per cent increase from N81.82 trillion recorded in September. The Federal Government accounted for N80.49 trillion, representing about 95 per cent of the total domestic debt, while state governments and the Federal Capital Territory held N4.36 trillion.

Domestic debt now constitutes 53.27 per cent of Nigeria’s total debt stock, underscoring the government’s growing reliance on local borrowing. On a year-on-year basis, domestic debt rose by N10.47 trillion, or 14.1 per cent, largely driven by efforts to finance the 2026 budget deficit amid rising expenditure and weak revenue performance.