Nigeria’s debt burden could place increasing pressure on government finances, with debt servicing projected to consume 71.7 percent of Federal Government revenue by 2030, according to the Debt Management Office (DMO).
The projection is contained in the DMO’s 2024 Debt Sustainability Analysis report, which examines the country’s ability to meet its current and future debt obligations amid economic challenges. The projected figure exceeds the DMO’s self imposed limit of 50 percent, raising concerns about the amount of government revenue that will remain available for infrastructure, healthcare, education and other public services.
According to the report, Nigeria’s debt service to revenue ratio stood at 60.6 percent in 2024. Although the figure is expected to decline to 44.9 percent in 2025, it is projected to rise to 51 percent in 2026 and 57.1 percent in 2027. The ratio is expected to increase further to 57.4 percent in 2028 and 67.3 percent in 2029 before reaching 71.7 percent in 2030.
The DMO attributed the projected increase to debt servicing growing faster than government revenue.
“This ratio is high and the fiscal space available to the Government is limited,” the report said.
Under a more difficult economic situation, the country’s debt service burden could become significantly worse. The DMO’s shock scenario projects the ratio to rise to 70.9 percent in 2027, 75.3 percent in 2028 and 89.6 percent in 2029 before reaching 97.3 percent in 2030.
“In the Shock Scenario, shortfall in domestic revenue mobilisation would push further the ratio from 57.4% in 2026 to 97.7% in 2030. Thus, fiscal space is further reduced and the ratio needs to be brought down.”
The report warned that both scenarios indicate potential threats to debt sustainability as debt payments continue to take up a growing share of government revenue.
Despite the rising cost of servicing debt, the DMO projected that Nigeria’s public debt to gross domestic product (GDP) ratio would decline over the projection period. Under the baseline scenario, the ratio is expected to fall from 53.7 percent in 2024 to 36.9 percent in 2025 and 33.3 percent in 2026. It is projected to decline further to 27.3 percent by 2030.
The figure is expected to remain below Nigeria’s recommended 60 percent threshold under its Medium Term Debt Management Strategy and the 70 percent benchmark under the IMF and World Bank framework. Nigeria’s total public debt stood at N133.33 trillion as of December 31, 2024, with market based debt accounting for 69.06 percent and non market based debt representing 30.94 percent.
The DMO identified weak revenue generation, exchange rate depreciation and global economic uncertainties as major risks to the country’s debt position. To reduce the pressure, the agency urged the Federal Government to strengthen revenue collection through tax reforms, expand the tax base and improve compliance using technology. It also recommended reducing fresh borrowing by exploring public private partnerships to finance infrastructure projects and relying more on concessional loans where available.
The agency further called for improved public spending, the sale or privatisation of government assets and compliance with relevant provisions of the Fiscal Responsibility Act and Central Bank of Nigeria Act. The DMO also advised the government to sustain petrol subsidy removal and maintain a unified and flexible exchange rate system, which it said had supported revenue generation.
“Overall, the sustainability of public debt remains moderate, but highly vulnerable to weak revenue mobilisation, exchange rate devaluation and global uncertainties,” the DMO said.
