Nigeria’s debt service-to-Federal Government income ratio is projected to rise to 71.7% by 2030 below the baseline situation, exceeding the 50% threshold advisable by the Debt Management Office (DMO) and rising strain on public funds.
The projection is contained within the Debt Management Office’s (DMO) 2024 Debt Sustainability Analysis (DSA) report, launched on Monday.
The company had but to publish the 2023 version of the report as of the time of submitting.
The report’s projections present that debt servicing will devour a rising share of Federal Government income over the approaching years, even because the nation’s public debt-to-GDP ratio is anticipated to decline.
Debt service ratio exceeds 50%
The DMO tasks that Nigeria’s debt service-to-revenue ratio will fall from 60.6% in 2024 to 44.9% in 2025 earlier than rising above the advisable 50% threshold in 2026.
The ratio is anticipated to improve progressively via the remainder of the projection interval, indicating that debt servicing will take up a bigger proportion of presidency income.
- The ratio is projected at 51% in 2026 and 57.1% in 2027.
- It is anticipated to rise to 57.4% in 2028 and 67.3% in 2029.
- By 2030, debt service is projected to account for 71.7% of Federal Government income.
Under the shock situation, the ratio is anticipated to rise from 44.9% in 2025 to 57.4% in 2026, 70.9% in 2027 and 75.3% in 2028, earlier than reaching 89.6% in 2029 and 97.3% in 2030.
The DMO attributes the projected improve to debt servicing rising sooner than authorities income. Its shock situation assumes a 30% alternate fee depreciation, a 2% decline in actual GDP and a 2.5% discount in income. By comparability, the baseline situation assumes an alternate fee of N1,500 to the greenback, actual GDP development of 4.8% and a main steadiness of three.8%.
The report additionally tasks that the general public debt-to-GDP ratio will decline from 53.7% in 2024 to 27.3% by 2030 below the baseline situation, in contrast with 34.6% below the shock situation. However, the decrease debt-to-GDP ratio doesn’t eradicate considerations about the price of servicing the debt relative to authorities income.
DMO warns of rising debt dangers
The DMO described Nigeria’s public debt sustainability as reasonable however extremely susceptible to weak income mobilisation, alternate fee devaluation and international uncertainties.
- It recognized elevated financing, refinancing and international alternate dangers within the nation’s debt portfolio, with a number of indicators exceeding the thresholds set in its evaluation.
- Nigeria’s common Eurobond unfold stood at 975.58 foundation factors between October 2 and December 31, 2024, above the 600-basis-point threshold. The DMO stated the determine displays larger borrowing prices and a rise in the price of elevating new debt.
- The annual change within the share of short-term debt in complete public debt was 1.8%, exceeding the 1% threshold. The report linked this to elevated Nigerian Treasury Bills issuance and the related refinancing dangers.
The share of public debt held by non-residents additionally stood at 49%, above the 45% threshold, indicating larger publicity to international alternate dangers.
The projections underline the problem of managing debt obligations when authorities income doesn’t develop quick sufficient to maintain tempo with debt servicing. A bigger share of public funds dedicated to debt funds leaves much less room for infrastructure, social companies and different funds priorities.
DMO outlines fiscal reform measures
To deal with the dangers, the DMO advisable sustaining the removing of the Premium Motor Spirit (PMS) subsidy and sustaining a unified and versatile alternate fee regime, which it stated had helped increase authorities income.
- It additionally known as for stronger income mobilisation via tax reforms, enlargement of the tax base, expertise adoption and improved tax compliance. The report urged the federal government to enhance public expenditure effectivity by directing funds in the direction of growth-enhancing investments able to increasing the economic system and rising income.
- The report suggested the federal government to think about privatisation or the sale of public belongings and rely extra on concessional financing the place obtainable.
- Nairametrics earlier reported that Nigeria spent $1.82 billion servicing external debt within the first half of 2026, down 21.5% from $2.32 billion in the identical interval of 2025, whilst curiosity funds to collectors, notably Eurobond buyers, elevated.
The country also spent N5.28 trillion servicing domestic debt in the first half of 2026, with curiosity and rental funds accounting for N4.95 trillion.
In one other report, Nairametrics found that Nigeria incurred N10.61 trillion in additional debt-service costs between June 2023 and December 2025, roughly N4.14 trillion greater than the N6.47 trillion spent on strategic infrastructure improvement over the identical interval.
The publication also reported that the Federal Government borrowed N11.9 trillion between June 2023 and December 2025, whereas arguing that financial reforms had created fiscal area and prevented even larger borrowing.
