Nigeria could be heading towards a deepening fiscal crisis, with the Federal Government projected to spend an alarming 71.7 per cent of its total revenue servicing debt by 2030, leaving significantly fewer resources for infrastructure, healthcare, education and other critical public services.
The warning is contained in the Debt Management Office’s (DMO) 2024 Debt Sustainability Analysis report, which projects that the country’s debt service-to-revenue ratio will rise far above the agency’s recommended threshold of 50 per cent under its baseline scenario.
According to the report, debt servicing, which accounts for 60.6 per cent of Federal Government revenue in 2024, is expected to decline temporarily to 44.9 per cent in 2025 before climbing beyond the recommended limit in subsequent years.
The ratio is projected to reach 51 per cent in 2026, 57.1 per cent in 2027, 57.4 per cent in 2028 and 67.3 per cent in 2029, before surging to 71.7 per cent by 2030.
The projections raise serious concerns about Nigeria’s fiscal future, as an increasingly large portion of government revenue could be swallowed by debt obligations, leaving limited funds for development projects, public infrastructure and essential services.
More troubling is the DMO’s adverse economic scenario, which suggests that debt servicing could consume as much as 97.3 per cent of Federal Government revenue by 2030, potentially leaving almost nothing for other government responsibilities.
The shock scenario assumes a 30 per cent depreciation of the naira, a two per cent contraction in real Gross Domestic Product (GDP) and a 2.5 per cent decline in government revenue.
Interestingly, despite the growing pressure from debt servicing, Nigeria’s public debt-to-GDP ratio is projected to decline from 53.7 per cent in 2024 to 27.3 per cent by 2030 under the baseline scenario.
However, the apparent improvement in the country’s debt-to-GDP position does not necessarily mean that Nigeria is becoming more financially comfortable.
The debt-to-GDP ratio measures public debt against the size of the economy, while the debt service-to-revenue ratio measures the government’s ability to meet its debt obligations using actual revenue.
This distinction is particularly significant for Nigeria, where weak revenue generation continues to undermine the government’s capacity to meet its financial obligations despite the size of the economy.
The DMO identified poor revenue mobilisation, exchange rate depreciation and global economic uncertainties as major threats to Nigeria’s debt sustainability.
The agency also raised concerns about increasing financing, refinancing and foreign exchange risks.
Its report further disclosed that Nigeria’s average Eurobond spread stood at 975.58 basis points between October 2 and December 31, 2024, significantly exceeding the DMO’s 600-basis-point threshold.
Similarly, the annual change in the proportion of short-term debt in total public debt stood at 1.8 per cent, above the recommended one per cent threshold.
The agency attributed the development partly to increased issuance of Nigerian Treasury Bills, warning of potential refinancing pressures as short-term debt obligations fall due.
The country’s debt servicing burden is already substantial. Nigeria spent $1.82 billion servicing external debt in the first half of 2026, while domestic debt servicing gulped another N5.28 trillion during the same period.
To prevent the projected risks from worsening, the DMO recommended sustained fiscal and revenue reforms, including improved tax compliance, expansion of the tax base, greater adoption of technology and more efficient public spending.
It also called for the maintenance of a unified and flexible exchange rate regime and the sustained removal of the petrol subsidy.
The projections underscore a critical challenge for Nigeria’s economy: reducing the country’s debt burden will mean little if the government cannot generate enough revenue to service its obligations without sacrificing essential public investments and services.
