Nigeria’s debt service burden to hit 71.7% of revenue by 2030, DMO warns
Nigeria’s debt service-to-revenue ratio could rise to 71.7 per cent by 2030, well above the Federal Government’s self-imposed ceiling of 50 per cent, as debt obligations continue to grow faster than government revenue, according to the Debt Management Office (DMO).
The projection highlights the pressure on public finances from the cost of servicing existing loans, even as the country’s debt-to-GDP ratio is expected to decline over the same period.
The figures are contained in the DMO’s 2024 Debt Sustainability Analysis (DSA), which examines Nigeria’s capacity to meet its current and future debt obligations amid weak revenue mobilisation, inflation, exchange-rate pressures and the government’s borrowing strategy.
Under the baseline scenario, the debt service-to-revenue ratio, which stood at 60.6 per cent in 2024, is projected to fall to 44.9 per cent in 2025 before climbing to 51 per cent in 2026 and 57.1 per cent in 2027.
The ratio is expected to edge up to 57.4 per cent in 2028, rise to 67.3 per cent in 2029 and reach 71.7 per cent by 2030.
The DMO attributed the projected increase to debt service growing faster than government revenue, leaving the authorities with less money to fund infrastructure, public services and other budgetary commitments.
“This ratio is high and the fiscal space available to the Government is limited,” the report stated.
The outlook becomes considerably worse under the DMO’s shock scenario, which assumes weaker economic conditions and a shortfall in domestic revenue mobilisation.
Under that assessment, the debt service burden is projected to rise from 57.4 per cent in 2026 to 70.9 per cent in 2027, 75.3 per cent in 2028 and 89.6 per cent in 2029.
The report gives the 2030 shock projection as 97.3 per cent in its initial forecast summary, although a later passage puts the figure at 97.7 per cent.
Either estimate points to an increasingly difficult fiscal position, with almost all government revenue potentially required to meet debt service obligations.
The DMO said the two scenarios underscore the threat posed by rising debt service costs, particularly if revenue growth fails to keep pace with repayment obligations.
Despite the warning over debt servicing, the DMO expects Nigeria’s public debt-to-GDP ratio to decline substantially under its baseline projections.
The ratio is projected to fall from 53.7 per cent in 2024 to 36.9 per cent in 2025 and 33.3 per cent in 2026. It is expected to decline further to 31.3 per cent in 2027, 29.7 per cent in 2028, 28.4 per cent in 2029 and 27.3 per cent by 2030.
Under the shock scenario, the debt-to-GDP ratio would rise to 39.4 per cent in 2026 and 38.7 per cent in 2027 before gradually declining to 34.6 per cent in 2030.
The DMO said these projections remain below Nigeria’s recommended 60 per cent threshold under the Medium-Term Debt Management Strategy for 2024–2027, as well as the 70 per cent benchmark under the IMF-World Bank Market Access Country Debt Sustainability Analysis framework.
Nigeria’s public debt stood at ₦133.33tn as of December 31, 2024, with market-based debt accounting for 69.06 per cent of the total and non-market-based debt representing the remaining 30.94 per cent.
The DMO also reported that the debt-to-GDP ratio was 53.72 per cent at the end of 2024, below the 70 per cent benchmark for emerging markets under the MAC-DSA framework. Gross financing needs stood at 3.2 per cent of GDP, compared with the framework’s 15 per cent threshold.
However, the difference between the debt-to-GDP and debt service-to-revenue measures is important.
While the former compares total public debt with the size of the economy, the latter measures how much of government revenue is absorbed by interest and principal repayments.
A country can therefore record a relatively moderate debt-to-GDP ratio and still face serious budgetary pressure when its revenue base is too small to comfortably meet repayment obligations.
For Nigeria, the DMO’s projections suggest that the ability to raise more revenue, rather than the debt stock alone, will remain central to managing the country’s fiscal risks.
The DMO’s baseline projections assume an exchange rate of ₦1,500 to the dollar, real GDP growth of 4.8 per cent and a primary balance of 3.8 per cent.
Under the shock scenario, the assumptions include a 30 per cent depreciation of the naira, weaker real GDP growth and a 2.3 per cent decline in revenue.
These risks are significant because exchange-rate depreciation can increase the naira cost of servicing external debt, while weaker economic activity and revenue collection reduce the resources available to meet government obligations.
The report identified financing, refinancing and foreign exchange risks as three major challenges to Nigeria’s debt position.
The DMO described the country’s overall public debt sustainability as moderate but highly vulnerable to weak revenue mobilisation, exchange-rate depreciation and global uncertainties.
To contain the pressure, the debt office recommended stronger revenue mobilisation, more efficient public spending and a reduction in new borrowing.
It urged the government to sustain fiscal and macroeconomic reforms, broaden the tax base and improve compliance through technology.
It also called for greater spending discipline, with public expenditure directed towards investments capable of supporting economic growth and generating additional revenue.
The DMO further recommended using public-private partnerships to finance capital projects, reducing reliance on direct government borrowing and complying with the provisions of the Fiscal Responsibility Act and the Central Bank of Nigeria Act relating to Ways and Means advances.
It also proposed the privatisation or sale of government assets and greater use of concessional financing where available.
The report specifically advised the government to sustain the removal of the premium motor spirit subsidy and the adoption of a unified and flexible exchange-rate system, which it said had helped improve revenue.
The recommendations reflect the DMO’s assessment that Nigeria must address the underlying weakness in government revenue if it is to prevent debt servicing from taking an increasingly large share of public resources.
The challenge is particularly important as the government balances debt repayments with demands for infrastructure, security, education, healthcare and social investment.
While the projected decline in the debt-to-GDP ratio may provide some indication of improving debt metrics, the rising debt service-to-revenue outlook points to a more immediate fiscal constraint.
Unless revenue growth outpaces the cost of servicing debt, the government could have progressively less room to finance development priorities without further borrowing.
