Nigeria’s Debt Management Office, DMO, has raised the alarm that at the current rate of borrowing, the Federal Government’ debt servicing may consume 72 percent of revenue by 2030, raising concerns about the funds available for infrastructure, healthcare, education and other public services.
The Debt Management Office projects that the debt service-to-revenue ratio will reach 71.7 percent by 2030 under its baseline scenario, significantly above the agency’s recommended threshold of 50 per cent.
The projection, contained in the DMO’s 2024 Debt Sustainability Analysis report released on Monday, highlights the growing fiscal pressure associated with servicing the country’s debt, despite an expected decline in public debt relative to the size of the economy.
The figures point to a widening fiscal challenge: Nigeria could record an improvement in its debt-to-GDP ratio while facing increasing difficulty meeting debt obligations from government revenue.
The DMO’s baseline projections show that the debt service-to-revenue ratio will decline from 60.6 percent in 2024 to 44.9 percent in 2025 before rising above the recommended threshold in 2026.
The ratio is projected to increase to 51 percent in 2026 and 57.1 percent in 2027. It is expected to reach 57.4 percent in 2028 and 67.3 percent in 2029 before climbing to 71.7 percent in 2030.
This means that for every N100 generated by the Federal Government, about N72 could be required to meet debt obligations by the end of the projection period.
The pressure could leave the government with less fiscal space to finance capital projects and essential services, while limiting its ability to respond to economic shocks without taking on additional debt.
The DMO, however, projects that Nigeria’s public debt-to-GDP ratio will decline from 53.7 percent in 2024 to 27.3 percent by 2030 under the baseline scenario.
The two indicators measure different aspects of debt sustainability. While debt-to-GDP compares the country’s total debt with the size of its economy, debt service-to-revenue measures the government’s capacity to meet repayment obligations from its income.
Consequently, a falling debt-to-GDP ratio does not automatically translate into stronger fiscal capacity if government revenue remains insufficient relative to debt payments.
The DMO’s shock scenario presents a more severe outlook, projecting that debt servicing could consume 97.3 percent of Federal Government revenue by 2030.
The scenario assumes a 30 percent exchange rate depreciation, a two percent decline in real gross domestic product, and a 2.5 percent reduction in revenue.
Under these conditions, the debt-to-GDP ratio is projected to reach 34.6 percent.
The agency identified weak revenue mobilisation, exchange rate depreciation and global economic uncertainties as major risks to debt sustainability.
It also highlighted elevated financing, refinancing and foreign exchange risks.
Nigeria’s average Eurobond spread stood at 975.58 basis points between October 2 and December 31, 2024, above the DMO’s 600-basis-point threshold.
The annual change in the share of short-term debt in total public debt was also 1.8 percent, exceeding the one percent threshold.
The DMO partly attributed the increase in short-term debt to greater issuance of Nigerian Treasury bills, which could expose the government to refinancing pressures as the securities mature.
The fiscal burden already shows up in debt payments. Nigeria spent $1.82bn servicing external debt in the first half of 2026, while domestic debt servicing amounted to N5.28tn over the same period.
To address these risks, the DMO recommended sustained revenue reforms, including improved tax compliance, expanding the tax base, adopting technology, and more efficient public expenditure.
It also called for maintaining a unified and flexible exchange rate regime and sustaining the removal of the petrol subsidy.
