By Chinwendu Obienyi
Nigeria’s fiscal space continues to narrow under the weight of mounting debt obligations, as the federal government confronts an estimated N8.5 trillion borrowing shortfall in the second half of 2025 (H2), despite aggressive tapping of the local debt market in the first half.
Data from a research and investment firm Afrinvest reveals that the FG raised N11.4 trillion in total debt in H1 2025, made up of N8.5 trillion in Nigerian Treasury Bills (NT-Bills) and N2.9 trillion in bonds. However, a staggering 93.8 per cent of the NT-Bills were used to refinance maturing obligations, leaving only N3.4 trillion in new funds available to support actual budgetary needs.
The challenge is further compounded by the National Assembly’s recent upward revision of the 2025 budget to N55 trillion, up from the previously proposed N49.7 trillion. With this expansion, experts warn that the FG’s total borrowing may exceed the initially projected N14.1 trillion fiscal deficit, raising red flags over the government’s capacity to meet future obligations without deeper structural reforms.
Afrinvest in its report titled; Beyond Silver Linings: Statistical Gains, Social strains, noted that the scale of rollovers suggests the FG is largely recycling old debts without unlocking substantial new fiscal space.
“With the budget size raised and revenue still struggling to catch up, we see a growing risk of the total borrowings exceeding the official deficit estimate,” the report said.
In a parallel analysis, Cordros Research in its mid-year review, estimates that the FG has only raised N3.84 trillion in net new debt from the domestic market as of H1 2025, leaving a financing gap of N8.52 trillion to be covered in H2.
To plug this shortfall, Cordros projects that the government will raise N6.68 trillion in additional domestic debt and issue a $1.23 billion Eurobond—roughly N1.84 trillion—based on their year-end exchange rate forecast of N1,700/$1.
If these debt instruments are fully realised, Nigeria’s total public debt is expected to surge by 13.8 per cent year-on-year, reaching N164.66 trillion by December 2025, compared to N144.67 trillion in 2024.
Although domestic borrowing offers a relatively predictable source of liquidity, analysts say the increasing cost of debt driven by higher interest rates and a weaker naira could severely impact the budget’s non-debt spending.
Nigeria has faced criticism in recent years for allocating up to 90 per cent of its revenue to debt servicing, leaving limited funds for capital projects, social welfare, or economic diversification efforts. While short-term debt instruments like NT-Bills provide immediate liquidity, the high rollover rate indicates limited fiscal breathing room and intensifies pressure on future budgets.
Commenting on the development, the Managing Director, APT Securities, Kurfi Garba, said, “The more we borrow to repay existing obligations, the smaller the fiscal room becomes.
This is unsustainable without strong revenue growth and better debt structuring”.
Garba urged the government to focus on concessional financing, broaden the tax base, and improve the efficiency of public spending to avoid a debt spiral.
“As Nigeria enters the second half of the year with an enlarged budget and unmet financing needs, the government faces a delicate balancing act: mobilising sufficient funds to support public spending and infrastructure delivery, while avoiding a debt spiral that could undermine macroeconomic stability”, he said.
