By Radarr Africa Business Desk
LAGOS, November 13 (Radarr Africa) – Nigeria’s debt has grown faster than its ability to raise revenue over the past decade, and interest payments now take a much larger share of government income, according to an S&P Global Institute report on capital markets in Africa.
The report says Nigeria’s debt rose to 38 per cent of gross domestic product in 2025 from 23 per cent in 2015. Over the same period, interest payments climbed to 24 per cent of government revenue from 14 per cent.
Borrowing abroad has become easier, the report says. Nigeria’s US-dollar sovereign bond issuance rose more than sevenfold between 2015 and 2026, and sovereign bond spreads narrowed by about 150 basis points. S&P argues, however, that wider investor access has not eased the country’s fiscal constraints.
Across rated African sovereigns, interest payments absorb about eight percentage points more of government revenue than the global average, according to the report. Several African economies collect less than 20 per cent of GDP in revenue, which limits spending on infrastructure and other public investment.
S&P links the high costs partly to shallow domestic savings pools, volatile inflation and the premium investors demand for currency and sovereign risk. Borrowing in local currency is not automatically cheaper, it says. Nigeria and Egypt paid about 13 to 15 per cent on domestic debt between 2021 and 2026, reflecting elevated inflation.
Domestic financial markets also offer little long-term funding. Private-sector credit across Africa has a median of about 17 per cent of GDP, compared with roughly 50 per cent in emerging markets. Only about a quarter of the continent’s estimated $4 trillion in financial assets is long term, insurance penetration is below 3 per cent of GDP, and pension assets average about 23 per cent of GDP.
S&P also warns that banks often hold government securities to meet liquidity and reserve requirements, while pension funds and insurers face investment restrictions. Short maturities and high interest rates, it says, could increase refinancing pressure. In the report’s words, “genuine capital-market development requires more than increased government bond issuance.”
As an example of what institutional savings and regulatory reform can achieve, S&P points to Brazil, where the domestic corporate bond market grew to about 70 per cent of GDP in 2025 from 16 per cent two decades earlier. For Nigeria, the report suggests that expanding long-term savings and creating more financing channels for businesses could reduce the concentration of domestic capital in government securities and improve access to productive investment.
The government’s own auctions this week show how heavily the domestic market leans on short-dated paper. At the Central Bank of Nigeria’s Treasury bill auction on November 11, run on behalf of the Debt Management Office (DMO), investors bid about N1.079 trillion for the 364-day bill against an offer of N600 billion, or roughly 179.85 per cent coverage. The CBN allotted N672.91 billion of the one-year paper, N72.91 billion above the offer. The 364-day stop rate rose to 15.89 per cent from 15.80 per cent at the November 4 auction.
Demand for the shorter tenors was thin. The 91-day bill drew about N19.18 billion against an offer of N100 billion, with a stop rate of 15.40 per cent, unchanged from the previous auction. The 182-day bill drew about N23.02 billion against N100 billion, at an unchanged 15.79 per cent. In total, the CBN allotted N713.31 billion of the N800 billion offered and left N86.69 billion unallotted.
The DMO’s retail savings bond offer for November, which ran from November 2 to 6 and settled on November 11, raised N5.06 billion, down 17.4 per cent from N6.12 billion in October. The DMO set rates of 13.25 per cent for the two-year bond and 14.25 per cent for the three-year bond, up from 13.071 per cent and 14.071 per cent in October, yet subscriptions fell in both tenors.
