Digestate is characterized by high water content, and in the water and wastewater treatment settings, necessitates both large storage capacities and a high cost of disposal. By seeding digestate with four magnetic nanoparticles (MNPs), this study aimed to recover biogas and boost its methane potential anaerobically. This was carried out via biochemical methane potential (BMP) tests with five 1 L bioreactors, with a working volume of 80% and 20% head space. These were operated under anaerobic conditions at a temperature 40 °C for a 30 d incubation period. The SEM/EDX results revealed that the morphological surface area of the digestate with the MNPs increased as compared to its raw state. Comparatively, the degree of degradation of the bioreactors with MNPs resulted in over 75% decontamination (COD, color, and turbidity) as compared to the control system result of 60% without MNPs. The highest biogas production (400 mL/day) and methane yield (100% CH4) was attained with 2 g of Fe2O4-TiO2 MNPs as compared to the control biogas production (350 mL/day) and methane yield (65% CH4). Economically, the highest energy balance achieved was estimated as 320.49 ZAR/kWh, or 22.89 USD/kWh in annual energy savings for this same system. These findings demonstrate that digestate seeded with MNPs has great potential to improve decontamination efficiency, biogas production and circular economy in wastewater management.