Nigeria’s debt servicing burden could rise to 71.7% of Federal Government revenue by 2030, exceeding the Debt Management Office’s (DMO) recommended threshold of 50% and leaving less money available for infrastructure, healthcare, education and other public services.
The projection is contained in the DMO’s 2024 Debt Sustainability Analysis (DSA) report, published on November 9, 2026, which assesses Nigeria’s capacity to meet its existing and future debt obligations under different economic conditions.
According to the report, debt service accounted for 60.6% of Federal Government revenue in 2024. Although the ratio is projected to decline to 44.9% in 2025, the DMO expects it to rise above its recommended threshold from 2026.
The agency projects the debt service-to-revenue ratio at 51% in 2026, 57.1% in 2027, 57.4% in 2028 and 67.3% in 2029 before reaching 71.7% in 2030.
The figures mean that approximately 72 kobo of every naira collected by the Federal Government could be committed to servicing debt by 2030, leaving less than 30 kobo for other expenditure priorities.
The DMO attributed the projected increase to debt service obligations growing faster than government revenue, warning in the report that the resulting pressure would further limit the fiscal space available to the government.
TheCable, in its November 9 report on the assessment, also quoted the DMO as warning that the rising ratio posed a threat to debt sustainability.
Debt burden could approach all federal revenue under shock scenario
The DMO’s assessment further examined an adverse economic scenario under which debt servicing could consume 97.3% of Federal Government revenue by 2030.
Under this scenario, the debt service-to-revenue ratio is projected to rise from 57.4% in 2026 to 70.9% in 2027, 75.3% in 2028 and 89.6% in 2029 before reaching 97.3% in 2030.
The assumptions include a 30% depreciation of the naira, a two per cent contraction in real gross domestic product and a 2.5% decline in government revenue.
The projection suggests that almost all federal revenue could be absorbed by debt obligations under the adverse conditions, leaving extremely limited resources for other government responsibilities.
Despite the rising debt servicing burden, the DMO projects that Nigeria’s public debt-to-GDP ratio will fall from 53.7% in 2024 to 27.3% by 2030 under the baseline scenario.
The agency expects the ratio to decline to 36.9% in 2025, 33.3% in 2026, 31.3% in 2027, 29.7% in 2028 and 28.4% in 2029.
The contrasting projections reflect the difference between the two debt indicators.
While debt-to-GDP measures the country’s total outstanding debt against the size of its economy, the debt service-to-revenue ratio measures the proportion of government revenue required to meet debt repayment obligations, including principal and interest.
This means Nigeria could record a declining debt-to-GDP ratio while facing increasing pressure to meet its repayment obligations if government revenue fails to grow sufficiently.
The DMO described Nigeria’s public debt sustainability as moderate but highly vulnerable to weak revenue mobilisation, exchange rate depreciation and global economic uncertainties.
The agency also identified several debt-related indicators that exceeded its recommended thresholds.
According to the DMO’s assessment, Nigeria’s average Eurobond spread stood at 975.58 basis points between October 2 and December 31, 2024, above its 600-basis-point threshold.
The annual change in the share of short-term debt was 1.8%, exceeding the recommended 1% threshold. The agency identified increased Treasury bill issuance as a factor contributing to refinancing pressure.
Non-residents also held 49% of Nigeria’s public debt, above the DMO’s 45% threshold, exposing the country’s debt portfolio to external financial market and exchange rate shocks.
To address the risks, the DMO recommended expanding the tax base, improving tax compliance through technology and strengthening public expenditure efficiency.
It also called for greater reliance on concessional financing, reduced dependence on new borrowing for capital projects through public-private partnerships and consideration of privatisation or the sale of government assets.
The agency further recommended sustaining fiscal and macroeconomic reforms, including petrol subsidy removal and a unified, flexible exchange rate regime.
The projections underscore the importance of improving government revenue generation and managing borrowing costs to create more fiscal room for infrastructure investment and essential public services.
