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, significantly exceeding the Debt Management Office’s (DMO) self-imposed 50 per cent limit, raising fresh concerns over the country’s fiscal sustainability.

The projection is contained in the DMO’s 2024 Debt Sustainability Analysis (DSA) report, which warns that rising debt servicing costs could further constrain government spending capacity despite an expected decline in the country’s debt-to-GDP ratio.

According to the report, Nigeria’s debt service-to-revenue ratio stood at 60.6 per cent in 2024 but is projected to decline to 44.9 per cent in 2025 before rising to 51 per cent in 2026 and 57.1 per cent in 2027.

The ratio is expected to increase further to 57.4 per cent in 2028, 67.3 per cent in 2029 and 71.7 per cent by 2030 under the baseline scenario.

The DMO attributed the projected increase to debt servicing obligations growing faster than government revenue, warning that the trend would leave the government with limited fiscal space to finance critical infrastructure and social services.

“This ratio is high and the fiscal space available to the Government is limited,” the report stated.

The outlook becomes more challenging under a shock scenario involving weaker economic conditions, currency depreciation and declining revenue mobilisation.

Under this scenario, the debt service burden could rise from 57.4 per cent in 2026 to 70.9 per cent in 2027, 75.3 per cent in 2028, 89.6 per cent in 2029 and 97.3 per cent by 2030.

The DMO warned that the worsening ratio would further reduce available fiscal resources, making it necessary for the government to take measures to bring down debt servicing costs relative to revenue.

Despite the concerns, the report projected a substantial decline in Nigeria’s total public debt-to-GDP ratio under the baseline scenario.

The ratio, which stood at 53.7 per cent in 2024, is expected to fall to 36.9 per cent in 2025, 33.3 per cent in 2026 and 31.3 per cent in 2027.

It is projected to decline further to 29.7 per cent in 2028, 28.4 per cent in 2029 and 27.3 per cent by 2030.

Under the shock scenario, however, the debt-to-GDP ratio is projected to rise to 39.4 per cent in 2026 and 38.7 per cent in 2027 before declining gradually to 34.6 per cent by 2030.

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The DMO noted that the projected figures remain below Nigeria’s recommended 60 per cent threshold under the Medium-Term Debt Management Strategy (2024–2027) and the 70 per cent benchmark under the IMF-World Bank Market Access Country Debt Sustainability Analysis framework.

The baseline projections assume an exchange rate of N1,500 to the dollar, real Gross Domestic Product growth of 4.8 per cent and a primary balance of 3.8 per cent.

The shock scenario, however, factors in a 30 per cent depreciation of the naira, weaker economic growth and a 2.3 per cent decline in revenue.

Nigeria’s total public debt stood at N133.33 trillion as of December 31, 2024, with market-based debt accounting for 69.06 per cent and non-market-based debt representing 30.94 per cent.

The DMO also identified financing, refinancing and foreign exchange risks as major threats to the country’s debt position.

To address the challenges, the agency recommended sustained fiscal and macroeconomic reforms, improved revenue mobilisation through tax reforms and greater efficiency in public expenditure.

It also urged the government to reduce reliance on new borrowing by leveraging public-private partnerships to finance capital projects, privatising or selling government assets and prioritising concessional financing where available.

The report further called for compliance with the Fiscal Responsibility Act and relevant provisions of the Central Bank of Nigeria Act on Ways and Means advances.

It also recommended sustaining the removal of the petrol subsidy and maintaining a unified, flexible exchange rate, which it said had supported government revenue.

The DMO stressed the need to expand the tax base, improve compliance through technology and prioritise public investments capable of generating revenue and stimulating economic growth.

“Overall, the sustainability of public debt remains moderate, but highly vulnerable to weak revenue mobilisation, exchange rate devaluation and global uncertainties,” the report stated.