By Charles Ebi
To meet the nation’s spending plan, the Nigerian government is expected to step up borrowing in the second half of the year, raising N7 trillion to finance the 2025 budget deficit, investment manager Zedcrest Wealth Limited said in a mid-year outlook.
Total public debt has expanded to about half of the nation’s gross domestic product size, raising concerns over sustainability.
Nigerian government borrowing in the debt market is expected to remain elevated, particularly as budgeted revenues are likely to fall short due to weaker oil receipts stemming from both lower-than-budgeted crude oil prices.
Weak oil output and lower crude oil prices have undermined federal government fiscal strength amidst macroeconomic uncertainties facing the country.
Revenue from oil exports and by extension, government income have suffered from a series of oil-backed loans and uncertainties in global commodities market
Over the last five months, Nigeria has failed to meet the Organization of Petroleum Exporting Countries ,OPEC, daily quota, hampering revenue capability. Crude oil prices have been negative for Nigeria’s fiscal performance until recent weeks, when they regained momentum due to escalating geopolitical tensions in the Middle East.
It is noted that savings from petrol subsidy removal has supported Nigeria’s government spending plan, but analysts think capital spending could suffer without additional borrowings.
The outlook for Nigeria’s fiscal sustainability in the second half of 2025 remains broadly concerning, with heightened borrowing pressures expected to persist through the second half of the year, Zedcrest said in a report titled “Charting Nigeria’s Next Reform Chapter”.
Details from the 2025 Appropriation Bill showed that the federal government projects aggregate revenue of N36.35 trillion against an aggregate expenditure of N49.74 trillion, resulting in a fiscal deficit of N13.39 trillion.
The authority planned to finance the budget deficit with N9.2 trillion in debt issuance, N312 billion in proceeds from asset sales and privatization, and multilateral/bilateral loans totaling N3.7 trillion.
Of the N9.2 trillion earmarked for debt financing in the 2025 budget, Zedcrest reported that only about N2.6 trillion has been raised in the first half of 2025.
According to the report, Nigeria has raised N2.5 trillion via FGN bonds and savings bonds and an additional N138.7 billion from Treasury bill sales.
Investment managers at Zedcrest Wealth Limited said in the macro update that this leaves a financing gap of over N7 trillion to be met in the second half of 2025.
Given the domestic inflationary environment, the cost of raising local debt is projected to decrease, investment managers stated. Citing improved macroeconomic indicators and positive rating revisions, analysts said this could facilitate additional multilateral and bilateral loan inflows.
Recall that Nigeria secured about $2.2 billion in project-tied loan disbursements from institutions including the China Development Bank, China EXIM Bank, and the World Bank in the first half of 2025.
This momentum is expected to continue in the second half of 2025, Zedcrest said. In addition, ahead of the Eurobond maturity scheduled for November 2025, there is a possibility that Nigeria will re-enter the international capital markets to refinance or restructure part of its external debt, the firm said.
Zedcrest forecasts Nigeria’s debt stock will be at least N162 trillion in 2025. With the expectation that gross domestic product would climb, partly driven by the expected rebasing exercise, Nigeria’s debt-to-GDP ratio is projected to print at around 58.3% by the end of 2025, the firm said.
But analysts maintained that the debt service-to-revenue ratio remains a key concern, likely to remain elevated at approximately 150% for the full year, underscoring persistent fiscal pressures and constrained debt sustainability. In the second half of 2025, Nigeria’s revenue performance is expected to fall below projections, primarily due to underwhelming crude oil output.
Production data showed that from the beginning of the year to date, monthly oil output has averaged 1.6 million barrels per day ,mbpd, well below the budget assumption of 2.06 mbpd.
Although the recent debut of a new crude grade, Obodo, may provide some uplift, it is unlikely to bridge the gap to the official target, analysts noted.
Adding pressure on Nigeria’s revenue, international oil prices have hovered around $65 per barrel, below the budget benchmark of $75 amid increased OPEC supply and the potential impact of U.S. tariffs on global crude oil demand.
On the non-oil revenue front, macroeconomic stabilization, especially improvements in the foreign exchange market, has supported profitability within the real sector.
Last month, President Bola Tinubu formally requested the National Assembly’s approval for the 2024–2026 external borrowing plan for a total amount of $24.10 billion, comprising $21.5 billion, EUR2.20 billion, and JPY15.00 billion.
Wale Edun, the finance minister, noted that the plan, a statutory component of the Medium-Term Expenditure Framework ,MTEF, covers projects at both federal and sub-national levels.
The external loan projection also includes a significant share of concessional financing from multilateral and bilateral partners, which can be drawn down within a 5–6 year period.
The 2023 revised 2024–2026 MTEF projected external borrowings of N9.17 trillion, or $13.29 billion, for the federal government, comprising N4.15 trillion, or $7.24 billion, in Eurobond issuances and N5.02 trillion, or $6.05 billion, in project-tied loans.
Analysts at Cordros Capital Limited said they believe the FG’s actual borrowing will be more closely aligned with its approved annual budget despite the broader MTEF targets.
The finance minister has reiterated that the 2025 external borrowing plans will reflect the budgetary provisions. For 2025, the government intends to raise N1.84 trillion, or $1.20 billion, via Eurobond issuance and secure an additional N3.80 trillion, or $2.53 billion, in project-tied loans.
Notably, the World Bank approved $1.08 billion in concessional financing in March 2025, which likely forms part of the project-related loan budget.
However, downside risks will persist, according to Cordros Capital Limited, as analysts cite that global macroeconomic uncertainty and cautious investor sentiment have driven borrowing costs higher, posing challenges to sovereign bond issuances.
Moreover, the realisation of project-linked loans will depend on the timely completion of appraisals and adherence to disbursement conditions.
Historically, Nigeria has struggled to execute capital projects effectively, with delays, weak procurement systems, and difficulties in meeting multilateral requirements often impeding performance.
Government borrowing in the debt market is expected to remain elevated, particularly as budgeted revenues are likely to fall short due to weaker oil receipts stemming from both lower-than-budgeted crude oil prices.
Between January and April 2025, the average crude oil price was $67.72/barrel, significantly below the budget benchmark of $75.00/barrel. Oil production averaged 1.68 mbpd as against a budget target of 2.06 mbpd.
With domestic borrowings generally carrying lower risk, including reduced currency exposure and more manageable debt servicing terms, Cordros Capital Limited anticipates that the government will continue to rely heavily on the domestic market to meet its financing needs.
Investment firm Cordros Capital Limited forecasted that the government could only achieve N28.77 trillion in revenue in 2025, far below Nigeria’s budgeted revenue of N41.81 trillion.
Analysts forecast the fiscal deficit to settle at N16.47 trillion in 2025, including project-tied loans of N3.80 trillion. Excluding these loans and privatization proceeds of N312.33 billion, analysts estimate net borrowing requirements at approximately N12.36 trillion.
The government’s ongoing pivot away from deficit financing through the Central Bank of Nigeria also underscores its growing reliance on the broader debt market.
