Nigeria spent more on debt servicing than it generated in revenue in the first quarter (Q1) of 2025, highlighting the growing fiscal pressure facing Africa’s largest economy despite relatively moderate debt-to-GDP levels, according to a new report by Coronation Merchant Bank.
In its Q4 2025 Debt Report, Coronation Merchant Bank said Nigeria’s debt-service-to-revenue ratio rose to an estimated 113 percent in Q1 2025, indicating that debt repayment obligations exceeded the Federal Government’s total revenue during the period.
The report noted that in January 2025 alone, debt servicing obligations stood at N696.27 billion against total retained revenue of N483.47 billion, translating to a coverage ratio of approximately 144 percent.
Analysts at the bank warned that the development shows Nigeria’s fiscal stress is more severe than headline debt metrics suggest.
“Debt obligations continue to exceed all federal revenue earned in a given period,” the report stated while emphasizing that the country’s debt-service-to-revenue ratio remains structurally above the World Bank’s recommended ceiling of 22.5 percent.
Nigeria’s total public debt stock rose to N159.28 trillion ($110.97 billion) in Q4 2025, representing a 3.9 percent increase from N153.29 trillion recorded in the previous quarter and N14.6 trillion above the level recorded in Q4 2024.
Despite the increase, the country’s debt-to-GDP ratio remained below the International Monetary Fund’s distress threshold. The IMF projects Nigeria’s debt-to-GDP ratio to decline further to 32.3 percent in 2026 from 35.5 percent in 2025 following the recent GDP rebasing exercise.
However, Coronation Merchant Bank argued that Nigeria’s core problem is not the size of its economy but the weakness of government revenue generation.
The report noted that Nigeria’s tax-to-GDP ratio remains around 9 to 10 percent, significantly below South Africa’s 24 percent, Kenya’s 16 percent and the Sub-Saharan African average of 15 percent.
According to the report, oil revenue shortfalls worsened the country’s fiscal position in 2025. Data from the Budget Office showed that federal revenue between January and July 2025 stood at N13.67 trillion against a prorated target of N23.85 trillion, leaving a shortfall of N10.19 trillion. Oil revenue was reportedly 62.2 percent below target during the period.
The report also highlighted Nigeria’s increasing dependence on external borrowing. External debt grew from $45.78 billion to $51.80 billion in 2025, supported by a $2.35 billion Eurobond issuance and additional multilateral and bilateral loans.
In March 2026, the National Assembly approved another $6 billion external borrowing package, including a $5 billion Total Return Swap facility with First Abu Dhabi Bank and a $1 billion UK Export Finance-backed facility.
Coronation Merchant Bank warned that unless Nigeria significantly improves revenue mobilization through tax reforms, VAT expansion and non-oil revenue growth, the country could remain trapped in what it described as a “self-reinforcing borrowing cycle.”