Nigeria’s debt service-to-revenue ratio is projected to rise to 71.7 per cent by 2030, exceeding the Debt Management Office’s self-imposed 50 per cent limit, amid growing pressure on government finances.
The ratio, which stood at 60.6 per cent in 2024, is expected to decline to 44.9 per cent in 2025 before climbing to 51 per cent in 2026, 57.1 per cent in 2027, 57.4 per cent in 2028 and 67.3 per cent in 2029.
The projections are contained in the DMO’s 2024 Debt Sustainability Analysis report, which assessed the country’s capacity to meet its current and future debt obligations amid weak revenue generation, inflation, naira depreciation and rising financing needs.
The office warned that debt servicing was growing faster than government revenue, leaving the country with limited fiscal space to finance other obligations.
“This ratio is high and the fiscal space available to the Government is limited,” the report said.
Under a shock scenario involving weaker economic conditions and declining revenue mobilisation, the debt service burden could rise sharply, reaching 89.6 per cent in 2029 and 97.3 per cent by 2030.
The DMO said the worsening ratio under the shock scenario would further constrain government finances, stressing the need to reduce the debt service burden.
The report identified the increasing pressure of debt servicing on government revenue as a major threat to debt sustainability.
DEBT-TO-GDP RATIO PROJECTED TO DECLINE
Despite the rising debt service burden, the DMO projected a significant decline in Nigeria’s public debt-to-GDP ratio under its baseline scenario.
The ratio is expected to fall from 53.7 per cent in 2024 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 in 2030.
Under the shock scenario, 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.
The DMO said the projected ratios remained 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 GDP growth of 4.8 per cent and a primary balance of 3.8 per cent.
The shock scenario, however, assumes a 30 per cent depreciation of the naira, weaker real GDP growth and a 2.3 per cent decline in revenue.
According to the report, Nigeria’s debt-to-GDP ratio stood at 53.72 per cent as of December 31, 2024, below the 70 per cent benchmark for emerging markets under the MAC-DSA framework.
The gross financing needs-to-GDP ratio was also 3.2 per cent, below the 15 per cent threshold.
However, the DMO identified financing, refinancing and foreign exchange risks as major threats to the country’s debt outlook.
DMO URGES REVENUE INCREASE, ASSET SALES
To address the growing debt burden, the DMO recommended increased revenue mobilisation through tax reforms, improved public expenditure efficiency and a reduction in new borrowings.
It also urged the government to leverage public-private partnerships to finance capital projects and comply with the provisions of the Fiscal Responsibility Act and the Central Bank of Nigeria Act on Ways and Means Advances.
The office further recommended the privatisation or sale of government assets and increased reliance on concessional financing where available.
It said fiscal consolidation, tax reforms, improved spending efficiency and exchange rate management would be critical to moderating the debt-to-GDP and debt service-to-revenue ratios.
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“Overall, the sustainability of public debt remains moderate, but highly vulnerable to weak revenue mobilisation, exchange rate devaluation and global uncertainties,” the DMO said.
The report also urged the government to sustain the removal of the Premium Motor Spirit subsidy and the adoption of a unified and flexible exchange rate, noting that both measures had helped improve revenue.
It advised the government to expand the tax base, improve compliance through technology and prioritise public spending on investments capable of boosting revenue and economic growth.
Nigeria’s total public debt stood at N133.33trn 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.
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