Nigeria’s debt service-to-Federal Government revenue ratio is projected to rise to 71.7% by 2030 under the baseline scenario, exceeding the 50% threshold recommended by the Debt Management Office (DMO) and increasing pressure on public finances.
The projection is contained in the Debt Management Office’s (DMO) 2024 Debt Sustainability Analysis (DSA) report, released on Monday.
The agency had yet to publish the 2023 edition of the report as of the time of filing.
The report’s projections show that debt servicing will consume a growing share of Federal Government revenue over the coming years, even as the country’s public debt-to-GDP ratio is expected to decline.
Debt service ratio exceeds 50%
The DMO projects that Nigeria’s debt service-to-revenue ratio will fall from 60.6% in 2024 to 44.9% in 2025 before rising above the recommended 50% threshold in 2026.
The ratio is expected to increase progressively through the rest of the projection period, indicating that debt servicing will take up a larger proportion of government revenue.
- The ratio is projected at 51% in 2026 and 57.1% in 2027.
- It is expected 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 revenue.
Under the shock scenario, the ratio is expected to rise from 44.9% in 2025 to 57.4% in 2026, 70.9% in 2027 and 75.3% in 2028, before reaching 89.6% in 2029 and 97.3% in 2030.
The DMO attributes the projected increase to debt servicing growing faster than government revenue. Its shock scenario assumes a 30% exchange rate depreciation, a 2% decline in real GDP and a 2.5% reduction in revenue. By comparison, the baseline scenario assumes an exchange rate of N1,500 to the dollar, real GDP growth of 4.8% and a primary balance of 3.8%.
The report also projects that the public debt-to-GDP ratio will decline from 53.7% in 2024 to 27.3% by 2030 under the baseline scenario, compared with 34.6% under the shock scenario. However, the lower debt-to-GDP ratio does not eliminate concerns about the cost of servicing the debt relative to government revenue.
DMO warns of rising debt risks
The DMO described Nigeria’s public debt sustainability as moderate but highly vulnerable to weak revenue mobilisation, exchange rate devaluation and global uncertainties.
- It identified elevated financing, refinancing and foreign exchange risks in the country’s debt portfolio, with several indicators exceeding the thresholds set in its analysis.
- Nigeria’s average Eurobond spread stood at 975.58 basis points between October 2 and December 31, 2024, above the 600-basis-point threshold. The DMO said the figure reflects higher borrowing costs and an increase in the cost of raising new debt.
- The annual change in the share of short-term debt in total public debt was 1.8%, exceeding the 1% threshold. The report linked this to increased Nigerian Treasury Bills issuance and the associated refinancing risks.
The share of public debt held by non-residents also stood at 49%, above the 45% threshold, indicating greater exposure to foreign exchange risks.
The projections underline the challenge of managing debt obligations when government revenue does not grow fast enough to keep pace with debt servicing. A larger share of public funds committed to debt payments leaves less room for infrastructure, social services and other budget priorities.
DMO outlines fiscal reform measures
To address the risks, the DMO recommended sustaining the removal of the Premium Motor Spirit (PMS) subsidy and maintaining a unified and flexible exchange rate regime, which it said had helped boost government revenue.
- It also called for stronger revenue mobilisation through tax reforms, expansion of the tax base, technology adoption and improved tax compliance. The report urged the government to improve public expenditure efficiency by directing funds towards growth-enhancing investments capable of expanding the economy and increasing revenue.
- The report advised the government to consider privatisation or the sale of public assets and rely more on concessional financing where available.
- Nairametrics earlier reported that Nigeria spent $1.82 billion servicing external debt in the first half of 2026, down 21.5% from $2.32 billion in the same period of 2025, even as interest payments to creditors, particularly Eurobond investors, increased.
The country also spent N5.28 trillion servicing domestic debt in the first half of 2026, with interest and rental payments accounting for N4.95 trillion.
In another report, Nairametrics found that Nigeria incurred N10.61 trillion in additional debt-service costs between June 2023 and December 2025, approximately N4.14 trillion more than the N6.47 trillion spent on strategic infrastructure development over the same period.
The publication also reported that the Federal Government borrowed N11.9 trillion between June 2023 and December 2025, while arguing that economic reforms had created fiscal space and prevented even higher borrowing.
