Nigeria could spend nearly three-quarters of its Federal Government revenue servicing debt by 2030, raising concerns about the country’s ability to finance infrastructure, healthcare, education and other essential public services.
The projection is contained in the Debt Management Office’s (DMO) 2024 Debt Sustainability Analysis report, which estimates that debt servicing could account for 71.7 per cent of Federal Government revenue by 2030 under its baseline scenario.
The projected figure exceeds the DMO’s recommended debt service-to-revenue threshold of 50 per cent, highlighting the growing pressure on government finances.
The warning comes despite expectations that Nigeria’s public debt-to-GDP ratio will decline over the same period, suggesting that a lower debt burden relative to the size of the economy may not necessarily translate into improved government finances.
Nigeria’s Debt Servicing Burden Could Keep Rising
According to the DMO, Nigeria’s debt service-to-revenue ratio is projected to decline from 60.6 per cent in 2024 to 44.9 per cent in 2025 before rising above the recommended threshold in 2026.
The ratio is expected to reach 51 per cent in 2026 and increase to 57.1 per cent in 2027.
The projection rises further to 57.4 per cent in 2028 and 67.3 per cent in 2029 before reaching 71.7 per cent by 2030.
This means that for every ₦100 the Federal Government generates in revenue, approximately ₦72 could be required to meet debt obligations by the end of the projection period.
Such a development could significantly restrict the funds available for roads, electricity, schools, hospitals and other development priorities.
It could also leave the government with less financial flexibility to respond to economic shocks.
Why Nigeria’s Debt-to-GDP Ratio Could Fall While Debt Pressure Rises
Interestingly, the DMO projects that Nigeria’s public debt-to-GDP ratio could decline from 53.7 per cent in 2024 to 27.3 per cent by 2030 under its baseline scenario.
However, this does not necessarily mean that the country’s debt repayment position will improve.
The debt-to-GDP ratio compares a country’s total debt with the value of its economic output, while the debt service-to-revenue ratio measures how much of government revenue goes towards repaying debt.
The distinction is particularly important for Nigeria, where limited revenue mobilisation can make debt repayment difficult, even when the country’s debt relative to GDP is declining.
In simple terms, the size of the economy may be growing relative to total debt, but if government revenue remains weak, meeting repayment obligations can still become increasingly difficult.
Debt Servicing Could Consume 97% of Revenue Under Economic Shocks
The DMO’s projections become more concerning under its adverse economic scenario.
The agency estimates that debt servicing could consume as much as 97.3 per cent of Federal Government revenue by 2030 if unfavourable economic conditions persist.
The scenario assumes a 30 per cent depreciation of the exchange rate, a two per cent decline in real gross domestic product and a 2.5 per cent reduction in government revenue.
Under these conditions, Nigeria’s debt-to-GDP ratio is projected to reach 34.6 per cent by 2030.
The implication is that weaker economic growth, declining government revenue and exchange rate pressures could leave the Federal Government with very limited resources after meeting its debt obligations.
Nigeria’s External and Domestic Debt Payments
The pressure on public finances is also reflected in Nigeria’s debt servicing obligations.
Nigeria spent $1.82 billion servicing external debt in the first half of 2026, while domestic debt servicing amounted to ₦5.28 trillion during the same period.
These payments illustrate the substantial resources required to meet both external and domestic debt obligations.
The figures also underline the importance of strengthening government revenue to ensure that debt payments do not increasingly crowd out spending on public services and development projects.
Weak Revenue and Refinancing Risks Raise Concerns
The DMO identified weak revenue mobilisation, exchange rate depreciation and global economic uncertainties as major risks to Nigeria’s debt sustainability.
The report 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, significantly above the DMO’s recommended threshold of 600 basis points.
The annual change in the share of short-term debt in total public debt also stood at 1.8 per cent, exceeding the agency’s recommended threshold of one per cent.
The increase was partly attributed to greater issuance of Nigerian Treasury bills, exposing the government to refinancing pressures as short-term obligations mature.
DMO Recommends Stronger Revenue Mobilisation
To address the risks, the DMO recommended sustained revenue reforms, including improved tax compliance, expansion of the tax base, greater use of 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.
The recommendations are aimed at improving government revenue and strengthening the country’s ability to meet its financial obligations without placing excessive pressure on public spending.
Ultimately, Nigeria’s debt challenge is not just about how much the country owes. It is also about how much the government earns and what remains after debt payments.
If revenue growth fails to keep pace with debt obligations, the Federal Government could face increasing difficulty financing essential services and development projects, even as its debt-to-GDP ratio declines.
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