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…As Tinubu Seeks $2.3bn External Loan For Budget Deficit, Others
…FG Unveils $100m Carbon Project To Boost Green Growth Agenda

Nigeria’s external debt servicing costs jumped sharply in August 2025, high­lighting the increasing pressure on government finances despite improved foreign exchange liquidity and a rebound in reserves.

According to the latest data from the Central Bank of Nigeria (CBN), external debt service payments rose by 68 percent month-on-month (m/m) to $302.3 million, up from $179.9 million in July.

This marks one of the steepest month­ly increases in recent years and contrasts with the 25 percent m/m growth record­ed in the previous month, signalling growing fiscal strain as the Federal Gov­ernment continues to balance rising debt obligations with limited revenue expansion.

On a year-on-year (y/y) basis, how­ ever, the growth was modest, up by just 8 percent, reflecting some relative stability compared with 2024. Yet, analysts warn that the trend could worsen in the coming months as new disbursements from multilateral and bilateral partners mature and interest payments rise on recently con­tracted loans.

 Debt Servicing Dominates FX Outflows

In August, external debt ser­vice payments accounted for approximately 63 percent of Ni­geria’s total foreign exchange out­flows, making it the single larg­est component of international payments for the month. This underscores how much external debt servicing is beginning to dominate the nation’s FX commit­ments, potentially crowding out other critical foreign payments such as import bills and exter­nal obligations of government agencies.

Cumulatively, between Jan­uary and August 2025, Nigeria spent about $2.9 billion on ex­ternal debt servicing, compared with $3.1 billion recorded during the same period in 2024. While the slight year-to-date decline in­dicates some reprieve, analysts say it reflects more on the timing of payments and restructured obligations rather than any fun­damental reduction in debt levels.

According to CBN data, Ni­geria’s total public debt stock— comprising domestic and exter­nal obligations—stood at about N121 trillion (approximately $90 billion) as of mid-2025, following fresh borrowings to fund infra­structure projects and bridge budget deficits. Of this, external debt accounts for around 38 per­cent, with servicing obligations denominated in foreign curren­cies—mainly the U.S. dollar—pos­ing a consistent strain on fiscal stability.

Domestic Borrowing Still The Mainstay

Despite the sharp uptick in external debt payments, the Federal Government has con­tinued to rely predominantly on the domestic debt market to finance its budget shortfall. With elevated global interest rates and cautious investor appetite for emerging-market Eurobonds, domestic instruments—such as FGN bonds, Sukuk, and treasury bills—remain the preferred route for funding.

However, domestic borrowing also carries its own risks, includ­ing higher yields that inflate local interest costs and crowd out pri­vate-sector access to credit. Ana­lysts at United Capital Research note that while external debt ser­vice rose in August, the “relative stability of the exchange rate com­pared with 2024 has helped ease the dollar-denominated burden.”

In 2024, the sharp deprecia­tion of the naira had amplified the cost of servicing dollar debts, forcing the government to com­mit a larger share of revenue to FX obligations. This year, the im­proved performance of the local currency and gradual return of FX inflows have provided some breathing room, even as nominal payments climb.

Reserves Rise Despite Outflows

In a counterintuitive twist, Nigeria’s external reserves have continued to rise, even amid grow­ing external debt obligations. The CBN reported that the reserves position increased by $1.1 billion month-on-month to $42.4 billion at the end of September 2025, up from $41.3 billion in August.

Year-to-date, reserves have grown by approximately $1.5 billion, signalling a sustained improvement in the country’s external liquidity profile.

Economists attribute this re­silience to improved FX earnings from crude oil exports, strong di­aspora remittances, and renewed foreign capital inflows, especially portfolio investments in the debt and equity markets following pol­icy reforms that restored investor confidence.

Nigeria’s average crude oil output has remained above 1.6 million barrels per day, the high­est in two years, supported by bet­ter pipeline security and reduced theft. Meanwhile, remittance in­flows—traditionally a key non-oil source of FX—have rebounded strongly as global economic conditions improve, adding an estimated $22 billion annually to inflows.

The combined effect has been a gradual rebuilding of reserves, bolstering the CBN’s capacity to stabilise the naira and meet ma­turing external obligations with­out depleting the buffer.

Stronger Naira, Softer Debt Pressure

The naira’s appreciation in re­cent months has also contributed to easing external debt pressure. Improved FX liquidity in the offi­cial window, a result of increased supply from the CBN and auton­omous sources, has led to a nar­rowing of the parallel-market premium.

As of late September, the nai­ra traded around N1,150/$ in the official market, compared to near­ly N1,450/$ mid-year—a gain of more than 20 percent. This appre­ciation, analysts say, reduces the local-currency value of external debt service payments and helps limit the fiscal impact.

A report by CardinalStone Research noted that “the ongo­ing appreciation of the naira, coupled with steady reserve ac­cretion, could limit Nigeria’s ex­ternal debt exposure in the near term and improve confidence in the government’s fiscal manage­ment.”

However, the firm cautioned that sustained improvement would depend on maintaining FX supply, curbing speculative demand, and keeping oil produc­tion stable.

Rising Borrowing Ahead

Looking ahead, financial ana­lysts expect external debt servic­ing to rise further in the fourth quarter of 2025, as disbursements from recently approved multilat­eral loans begin to crystallise. Nigeria has secured several con­cessional facilities from the World Bank, African Development Bank, and Islamic Development Bank for energy transition, in­frastructure, and budget support.

While these loans typically come at lower interest rates, their cumulative effect could elevate overall debt-service obligations. Fiscal experts argue that without significant revenue growth—par­ticularly non-oil revenue—the ris­ing debt-service ratio could erode fiscal flexibility.

According to the Debt Man­agement Office (DMO), debt service already consumes over 70 percent of Nigeria’s total rev­enue, a ratio widely seen as un­sustainable.

The World Bank and IMF have both advised Nigeria to expand its tax base and accelerate fiscal reforms to reduce reliance on borrowing.

Experts Call For Fiscal Discipline

Commenting on the data, Lagos-based economist Dr. John­son Chukwu said the rise in debt service payments “reflects the structural weakness in Nigeria’s fiscal system.”

“While external reserves are rising, the underlying problem is that we’re still borrowing faster than we’re earning. The im­proved reserves offer relief, but they don’t erase the debt prob­lem,” he said.

He added that the government must prioritise debt sustainabil­ity by improving tax collection, rationalising subsidies, and en­suring that borrowed funds are invested in projects that generate measurable returns.

Similarly, Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), urged the government to strengthen its medium-term debt strategy.

“We should reduce commer­cial borrowing, focus on conces­sional sources, and expand do­mestic revenue through reforms in Customs, VAT, and mining,” he advised.

Tinubu Seeks $2.3bn External Loan For Budget Deficit, Others

Meanwhile, President Bola Tinubu has formally written to the House of Representatives, seeking legislative approval to raise a total of $2.347 billion in ex­ternal loan as well as permission to issue a stand-alone Sovereign Sukuk worth $500 million on the international market.

The president’s request, con­tained in a letter read by Speaker Tajudeen Abbas during Tues­day’s plenary, seeks authorisa­tion for the Federal Government to secure new foreign borrowing of N1.843 trillion, equivalent to about $1.229 billion at the 2025 budget exchange rate of $1/ N1,500.

The funds, Tinubu explained, are intended to part-finance the 2025 budget deficit and refinance an existing $1.118 billion Euro­bond maturing later this year.

According to the president, the proposed borrowing will be raised through one or a com­bination of instruments in the International Capital Market (ICM), including Eurobond issu­ance, loan syndications, bridge financing from bookrunners, or direct loans from international financial institutions.

Tinubu further explained that the 2025 Appropriation Act approved N9.27 trillion in new borrowing to finance the budget deficit, of which N1.843 trillion — about $1.229 billion — will be sourced externally.

He noted that Nigeria’s $1.118 billion Eurobond, issued in No­vember 2018 at 7.625% with a seven-year maturity, will mature on November 21, 2025. To avoid a potential default, he said the gov­ernment plans to refinance the bond using one or more of the listed funding options.

“This is a standard practice in global debt markets,” the let­ter stated. “The resolution of the House is therefore required to authorise the Federal Govern­ment to refinance the maturing Eurobond accordingly.”

When combined with the new borrowing requirement, the total amount Nigeria intends to raise stands at $2.347 billion. Tinubu expressed confidence that Nige­ria, as a regular issuer of Euro­bonds, can successfully attract the required capital, subject to market conditions.

He added that the terms and conditions of the borrowing would be determined at the time of issuance and guided by prevail­ing market dynamics.

The Federal Ministry of Fi­nance and the Debt Management Office (DMO), he said, would work closely with transaction advisers to secure the most fa­vourable terms for the country.

In addition to the external bor­rowing plan, President Tinubu also asked the House to approve the issuance of a stand-alone debut Sovereign Sukuk of up to $500 million in the international market, with or without a credit guarantee.

The president highlighted Ni­geria’s previous successes with Sukuk bonds in the domestic capital market. Between Sep­tember 2017 and May 2025, the DMO raised about N1.392 tril­lion through Sukuk issuances to finance critical road infrastruc­ture projects across the country. Expanding into the internation­al Islamic finance market, he argued, would help bridge Nige­ria’s infrastructure funding gap, diversify the country’s investor base, and deepen the Federal Government’s securities market.

Tinubu explained that the proposed Sukuk issuance could be guaranteed by the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IsDB) Group.

The president stressed that approval of the request is crucial for supporting Nigeria’s fiscal plans, refinancing existing debt obligations, and unlocking new funding sources to accelerate in­frastructure development.

FG Unveils $100m Carbon Project To Boost Green Growth Agenda

The Federal Government is advancing its green growth agenda with the launch of the $100 million Orteva Carbon Proj­ect, a major initiative designed to unlock climate finance, generate carbon credits, and accelerate the country’s transition to a sustain­able economy, Federal Ministry of Finance has said.

The landmark project was highlighted by the Minister of Fi­nance and Coordinating Minister of the Economy, Mr. Wale Edun, during strategic discussions held in Abuja with a delegation from Orteva, in partnership with the Delta State government and Eighth Versa.

According to a statement signed by Mohammed Manga, Director of Information and Public Relations, describing the project as a timely intervention, Edun emphasised the project’s alignment with President Bola Ahmed Tinubu’s vision of green growth and sustainable economic transformation.

The initiative forms a core part of Nigeria’s Energy Tran­sition Plan and aims to diversify government revenue beyond oil, attract foreign exchange, and cre­ate jobs for Nigerians.

With efforts including man­grove conservation and biochar production, the Orteva Carbon Project is projected to generate between $350 million and $2.8 billion in carbon credit revenue, establishing Nigeria as a leading hub for credible carbon trading in Africa.

Minister Edun assured that the government is committed to developing a transparent carbon market framework with robust governance and pricing mecha­nisms.

Highlighting opportunities for the private sector, he noted that the project offers avenues to invest in environmentally protective ini­tiatives that deliver sustainable economic returns.