Nigeria’s public debt increased marginally in the first quarter of 2026, while crude oil production recorded its first decline in four months, highlighting continuing challenges for the country’s fiscal position and oil-dependent economy.
Data from the Debt Management Office (DMO) showed that Nigeria’s total public debt rose by 0.1% quarter-on-quarter to N159.35 trillion in Q1 2026, compared with N159.28 trillion at the end of 2025.
The increase comes as the Federal Government continues to rely on borrowing to finance public expenditure amid persistent revenue constraints.
Domestic Debt Accounts for More Than Half of Total Debt
Domestic borrowing remained the largest component of Nigeria’s public debt.
Total domestic debt increased by 3.0% quarter-on-quarter to N87.40 trillion, representing 54.8% of the country’s total public debt.
The increase reflected higher debt stocks at both the state and federal government levels.
State government debt increased by 3.7% during the quarter, while Federal Government debt rose by 3.0%.
The continued increase in domestic borrowing highlights the pressure facing government finances as authorities seek to fund expenditure commitments and bridge revenue gaps.
Naira Appreciation Reduces External Debt Value
Nigeria’s external debt stock, meanwhile, declined by 3.3% quarter-on-quarter to N71.95 trillion, compared with N74.43 trillion in the fourth quarter of 2025.
The decline in naira terms was largely linked to the appreciation of the Nigerian currency during the quarter.
The naira appreciated by approximately 3.5%, moving from N1,435.26 per US dollar in Q4 2025 to N1,386.22 per dollar in Q1 2026.
However, the picture was different when external debt was measured in US dollars.
External debt increased marginally by 0.1% quarter-on-quarter to approximately $51.90 billion, from $51.86 billion previously.
The increase reflected additional disbursements from multilateral lenders and higher syndicated loans, particularly those connected to capital projects.
The African Development Bank Group accounted for approximately $74.82 million in additional disbursements during the period.
On a year-on-year basis, Nigeria’s total public debt increased by 6.7%.
Government Borrowing Expected to Increase
Nigeria’s debt burden could rise further during the remainder of 2026 as the government seeks to finance its budget deficit.
The 2026 Federal Government budget provides for a deficit of N31.46 trillion, while current estimates put the likely deficit at about N26.88 trillion.
With government revenues still under pressure, additional borrowing is expected to remain an important source of financing.
Public debt is projected to reach approximately N183.58 trillion by the end of 2026, equivalent to about 36.2% of GDP.
While Nigeria’s debt-to-GDP ratio remains below levels seen in some other emerging markets, the cost of servicing debt remains an important concern because rising borrowing can place additional pressure on government finances.
Nigeria’s Oil Production Falls in July
Meanwhile, Nigeria’s crude oil production declined in July following four consecutive months of increases.
Data from the Nigerian Upstream Petroleum Regulatory Commission showed that crude oil production, including condensates, fell by 3.7% month-on-month to 1.67 million barrels per day (mb/d) in July.
Production stood at approximately 1.74 mb/d in June.
The decline was largely associated with operational challenges at some major oil terminals.
Production at the Erha terminal dropped by 49.9% during the month, while output at the Akpo terminal declined by 29.9%.
These reductions significantly affected overall national production.
Other terminals also recorded smaller declines. Production at Escravos fell by 1.6%, Bonny declined by 1.4%, while Bonga recorded a marginal 0.1% reduction.
Some Oil Terminals Record Stronger Output
Despite the overall decline, several terminals recorded production increases during the month.
Tulja-Okwuibome posted the strongest increase, with output rising by 13.6%.
Forcados production increased by 8.7%, while Brass recorded a 6.3% increase. Odudu rose by 6.1%, and Agbami production increased by 3.1%.
However, the gains were insufficient to offset the significant production declines at Erha and Akpo.
The July figures underline the continuing volatility in Nigeria’s oil sector, where operational disruptions and infrastructure constraints can have a significant impact on national production.
Investment and Security Could Support Recovery
Nigeria’s oil production outlook remains cautiously positive.
Higher investment in the upstream sector, improvements in security conditions and the integration of new oil fields and evacuation routes could help raise production in the coming months.
However, intermittent shutdowns at oil terminals remain a major risk.
Infrastructure limitations and operational disruptions could continue to affect production and prevent Nigeria from consistently reaching higher output levels.
For 2026, the country’s average crude oil production estimate remains at approximately 1.70 million barrels per day.
Debt and Oil Production Remain Key Economic Indicators
The latest figures highlight two major issues confronting Nigeria’s economy: the need to manage rising public borrowing and the need to increase oil production.
Higher oil output would potentially provide additional government revenue and foreign exchange earnings, helping to strengthen public finances and support economic stability.
At the same time, managing the pace and cost of government borrowing will remain critical as Nigeria seeks to finance infrastructure and other public spending without placing excessive pressure on future budgets.
For investors and policymakers, developments in oil production, government revenues, borrowing requirements and debt servicing costs will remain important indicators of Nigeria’s economic outlook through 2026.
