• Short-term investment surge deepens structural risks, experts warn
• ‘Trend undermines long-term development, fiscal stability’  
• Debt stock to GDP ratio pushing above 40% recommended ceiling  

Operators have raised fresh concerns over the country’s growing appetite for short-term investments at a time when public debt has surged to N152.39 trillion.
 
The operators warned that the dominance of treasury bills, commercial papers and other fast-maturing instruments is tightening structural pressures and posing a serious threat to long-term fiscal stability, even as government borrowing continues to accelerate.

Also, the decision by the Federal Government to issue an additional $2.35 billion Eurobond, which attracted $13 billion orders, analysts feared could push the country’s total public debt towards far beyond the current level by the end of the year.
The National Bureau of Statistics (NBS) in its report said that Nigeria’s debt stock rose by 2.01 per cent quarter-on-quarter from N149.38 trillion in Q1 2025, while year-on-year figures show an N18.09 trillion increase from N134.3 trillion recorded in Q2 of 2024.

The total is made up of N71.8 trillion in external debt and N80.55 trillion in domestic obligations, with domestic liabilities accounting for 52.86 per cent of the overall burden.
Despite the rise of the national debt, the combined debts of the 36 states and the Federal Capital Territory (FCT) declined slightly from N11.47 trillion in Q2 2024 to N11.32 trillion in Q2 2025.
 
The marginal decrease comes amidst rising allocations from the Federation Account Allocation Committee (FAAC), which amounted to N5.52 trillion in the first nine months of 2025.
This is the first time in over a decade that the states would see their debt profile decline.
Even as the overall debt stock seems to have peaked, market operators warned that the Federal Government’s growing reliance on short-term domestic borrowing of over N6 trillion in just the first half of 2025 reflects deeper vulnerabilities.
 
They warned that short-term liabilities could trigger fiscal instability.
Executive Director of Halo Capital Management, Dr Paul Uzum, linked the strong preference for short-term securities to Nigeria’s volatile macroeconomic conditions.
According to him, with inflation surging, the naira weakening and policy signals often shifting abruptly, investors are favouring instruments that allow quick exits.
This has contributed to an inverted yield curve in which one-year treasury bills yield about 19 per cent, outpacing the roughly 15.5 per cent offered on 10-year government bonds.
Uzum argued that this unusual pricing environment, which has persisted for two years, signalled economic uncertainty and kept investors clustered at the short end of the market.

He noted that short-term yields adjusted rapidly to inflation, helping investors protect purchasing power, while long-term yields, shaped by expectations around future inflation, fiscal sustainability and economic management lag and appear less attractive.
The operators pointed out that without a shift in market dynamics and improved economic confidence, Nigeria risks long-term capital starvation at a time when infrastructure needs are expanding.
 
Also, independent investor, Amaechi Egbo, cautioned that the dominance of short-term instruments was generating a dangerous mismatch between Nigeria’s long-term development needs and the nature of capital currently available.
He noted that large-scale projects in transport, housing, energy and industrial development required patient capital that matures over decades, noting that these funds were becoming increasingly scarce in Nigeria’s current investment climate.
The consequence, he warned, could include higher refinancing risks, weakening investor confidence in major projects, prolonged development timelines and rising borrowing costs for the government.

At the state level, all the 36 states and the Federal Capital Territory (FCT), Abuja, have a total external debt of $4.811 billion and a domestic debt of N3.96 trillion as at the second quarter of 2025.
Lagos state recorded the highest domestic debt in Q2 2025 with N1.04 trillion, followed by Rivers with N364.39 billion, while Jigawa state recorded the lowest with N852.49 million, followed by Ondo with N10.64 billion.

The state also recorded the highest external debt over the reference period with $1.04 billion, followed by Kaduna with $658.70 million, while FCT had the lowest with $19.26 million, followed by Yobe with $23.08 million.
Data from the National Bureau of Statistics shows that the 36 states of the Federation have in the first nine months of 2025, received a total of N5.52 trillion from FAAC.
This figure is 41 per cent higher than the N3.92 trillion the states received during the same period in 2024.

Between 2024 and the first quarter of 2025, the 36 states and the FCT have also witnessed a drop in their debt profile.
As of the second quarter of 2024, the total debt of the 36 states and the FCT is N11.47 trillion. This dropped to N11.32 trillion as of Q2.
Jigawa state recorded the most significant percentage reduction, cutting its debt by about 95 per cent to a low of approximately N1.06 billion by March 2025.
The state was followed by Ondo, which achieved a 77 per cent reduction, bringing its debt profile down from N71.5 billion in December 2023 to N11.76 billion by Q1 2025.
Kebbi state reduced its debt by 72 per cent, settling at around N15.10 billion in Q1 2025, while Ebonyi and Kogi states reduced their own debts by 68 per cent within the same period.
Kaduna state lowered its domestic debt by 66 per cent, to N25.01 billion in Q1 2025. Abia reduced its debt significantly, cutting N65.04 billion to stand at N48.67 billion in Q1 2025.
While some states have achieved a tremendous reduction in debt profile, indicating an improved debt position, federal borrowing has continued to surge.

Between January and October 2025, the federal government borrowed N17.36 trillion, with domestic loans amounting to N15.8 trillion and foreign loans in the first half of the year reaching N1.56 trillion.
Nigeria’s debt-to-Gross Domestic Product (GDP) ratio stands at 39.4 per cent following rebasing.

With the latest update, the debt stock to GDP has crossed 40 per cent, even as analysts estimate that current spending pressures may raise the figure closer to over 50 per cent – well above the government’s 40 per cent threshold.
Debt servicing is projected to consume N15.81 trillion in the 2025 budget, accounting for 45 per cent of projected revenues.

With the naira’s steep depreciation inflating repayment costs, operators warned that continued borrowing was crowding out private-sector investment, pushing up interest rates and stoking inflation.

With the short-term investment dominance and rising public debt, Egbo expressed fear that the country may be drifting towards a cycle in which immediate returns overshadow long-term economic vision.

He further stressed the need for stronger policy reforms, incentives for long-tenor investments, and deeper capital-market development to prevent Nigeria from sacrificing its developmental trajectory to short-term financial pressures.