Nigeria's public debt stock has risen to N166.8 trillion in the second quarter of 2026, according to data from the Debt Management Office (DMO). This represents a 5% increase quarter-on-quarter and a 9% year-on-year rise. The debt stock covers obligations of the Federal Government, states, and the Federal Capital Territory. The increase is largely driven by domestic borrowing as the Federal Government continues to finance its sizeable fiscal deficit.
Despite the rising debt stock, Nigeria's debt-to-GDP ratio stood at about 38.7% in 2025, well below the DMO's 60% sustainability limit. This indicates that the country's debt is still within a manageable range. The composition of Nigeria's debt portfolio remained broadly stable during the period, with domestic debt accounting for 54.9% and external debt making up 45.1% of total public debt.
The country's debt structure is almost exactly in line with the DMO's preferred 55:45 domestic-to-external debt mix. This structure is designed to balance the cost and risks associated with borrowing from local and international markets. However, the latest debt profile highlights the increasing reliance of the Federal Government on the domestic capital market to fund its financing requirements.
Domestic debt increased by 14% year-on-year to N91.6 trillion, reflecting elevated government borrowing requirements amid the substantial fiscal deficit contained in the 2026 budget. The Federal Government's 2026 budget is estimated to carry a N31.5 trillion fiscal deficit, creating a significant financing gap that has continued to drive borrowing from the domestic market.
Analysts say the trend underscores the delicate balance facing the government as it seeks to finance infrastructure, recurrent expenditure, and other budgetary obligations while containing debt-service pressures and maintaining fiscal sustainability. A major factor helping to moderate the naira value of Nigeria's external debt has been the relative stability and appreciation of the domestic currency.
Nigeria's external debt stock increased significantly in dollar terms, rising by 16% year-on-year to $54.5 billion. However, the corresponding increase in its naira value was much smaller, at 5% to N75.2 trillion. The divergence is largely attributable to movements in the exchange rate used in valuing foreign-currency obligations, with the official exchange rate appreciating to N1,379.18/$ from N1,529.21/$ a year earlier.
The relatively stable debt composition masks an important shift in the underlying borrowing pattern, with domestic obligations growing more rapidly than external debt in naira terms. This reflects the Federal Government's continued use of the local debt market as a major source of financing, particularly at a time when fiscal requirements remain substantial. The development raises questions about the cost of domestic borrowing and its implications for private-sector access to credit.
Key points
- Nigeria's public debt stock rises to N166.8 trillion in Q2 2026.
- Domestic debt increases by 14% year-on-year to N91.6 trillion.
- Nigeria's debt-to-GDP ratio remains below 60% sustainability limit.
