ABUJA: Nigeria’s debt burden could place increasing pressure on government finances over the next four years, with debt servicing projected to consume 71.7 per cent of Federal Government revenue by 2030 under the baseline scenario, according to the Debt Management Office (DMO).
The projection, contained in the DMO’s 2024 Debt Sustainability Analysis (DSA) report released on Monday, November 9, 2026, indicates that the Federal Government may face growing difficulties balancing debt obligations with spending on infrastructure, healthcare, education and other public services.
The projected ratio is significantly above the 50 per cent threshold recommended by the DMO, raising concerns about the sustainability of government finances and the country’s ability to generate sufficient revenue to meet its financial obligations.
The report shows that although Nigeria’s public debt-to-GDP ratio is expected to decline over the projection period, the proportion of government revenue required to service debt could continue rising.
According to the DMO, Nigeria’s debt service-to-revenue ratio stood at 60.6 per cent in 2024 before declining to 44.9 per cent in 2025.
However, the agency projects that the ratio will rise above its recommended 50 per cent threshold in 2026 and continue increasing through 2030.
The projections indicate that debt servicing will account for 51 per cent of Federal Government revenue in 2026 and 57.1 per cent in 2027.
The ratio is expected to increase slightly to 57.4 per cent in 2028 before climbing to 67.3 per cent in 2029 and reaching 71.7 per cent by 2030.
This means that under the baseline scenario, more than seven out of every ten naira generated as Federal Government revenue could be required to meet debt service obligations by the end of the projection period.
The DMO’s shock scenario presents a more challenging outlook, projecting that the debt service-to-revenue ratio could rise to 57.4 per cent in 2026, 70.9 per cent in 2027 and 75.3 per cent in 2028.
It is further projected to reach 89.6 per cent in 2029 and 97.3 per cent by 2030.
Under that scenario, almost all Federal Government revenue could be absorbed by debt servicing, leaving very limited fiscal space for other government responsibilities.
The DMO attributed the projected increase in debt servicing pressure to the possibility that debt obligations could grow faster than government revenue.
Its baseline scenario assumes an exchange rate of ₦1,500 to the dollar, real Gross Domestic Product (GDP) growth of 4.8 per cent and a primary balance of 3.8 per cent.
By contrast, the shock scenario considers a 30 per cent depreciation of the exchange rate, a two per cent decline in real GDP and a 2.5 per cent reduction in government revenue.
These assumptions illustrate the potential impact of currency depreciation, weaker economic performance and revenue shortfalls on Nigeria’s ability to meet its debt obligations.
A weaker naira can increase the local currency cost of servicing foreign-denominated debt, while slower economic growth and reduced revenue collection can limit the resources available to the government.
Despite the rising debt service-to-revenue projections, the DMO expects Nigeria’s public debt-to-GDP ratio to decline significantly by 2030.
Under the baseline scenario, the ratio is projected to fall from 53.7 per cent in 2024 to 27.3 per cent by 2030.
Under the shock scenario, however, the public debt-to-GDP ratio is expected to stand at 34.6 per cent in 2030.
The figures highlight an important distinction in assessing public debt sustainability: a declining debt-to-GDP ratio does not automatically mean that the cost of servicing debt is becoming easier for the government to manage.
The ability to meet debt obligations also depends on the size of government revenue, borrowing costs, foreign exchange movements and the structure of the country’s debt portfolio.
The DMO described Nigeria’s public debt sustainability as moderate but highly vulnerable to weak revenue mobilisation, exchange rate devaluation and global economic uncertainties.
The report also identified elevated financing, refinancing and foreign exchange risks, with some debt indicators exceeding the thresholds established in its analysis.
One of the concerns highlighted was Nigeria’s average Eurobond spread, which stood at 975.58 basis points between October 2 and December 31, 2024.
This was above the DMO’s 600-basis-point threshold and reflected higher borrowing costs as well as increased expenses associated with raising new debt.
The agency also reported that the annual change in the share of short-term debt in total public debt stood at 1.8 per cent, exceeding the one per cent threshold.
It linked the development to increased issuance of Nigerian Treasury Bills and the refinancing risks associated with short-term borrowing.
Another concern was the proportion of public debt held by non-residents, which stood at 49 per cent, above the 45 per cent threshold.
A higher proportion of foreign-held debt exposes the country’s debt portfolio to exchange rate movements and other external financial pressures.
The latest DMO projections come amid substantial debt servicing expenditure by the Federal Government.
According to earlier Nairametrics reports referenced in the publication, Nigeria spent $1.82 billion servicing external debt in the first half of 2026, representing a 21.5 per cent decline from the $2.32 billion recorded during the corresponding period of 2025.
Despite the reduction in total external debt service payments, interest payments to creditors, particularly Eurobond investors, increased.
The Federal Government also spent ₦5.28 trillion servicing domestic debt during the first half of 2026, with interest and rental payments accounting for ₦4.95 trillion.
Another report indicated that Nigeria incurred an additional ₦10.61 trillion in debt service costs between June 2023 and December 2025.
That amount was approximately ₦4.14 trillion higher than the ₦6.47 trillion spent on strategic infrastructure development over the same period.
The publication also reported that the Federal Government borrowed ₦11.9 trillion between June 2023 and December 2025, while arguing that economic reforms had created fiscal space and prevented even higher borrowing.
To address the risks identified in the report, the DMO recommended that the Federal Government sustain key fiscal reforms, including the removal of the Premium Motor Spirit (PMS) subsidy and the maintenance of a unified and flexible exchange rate regime.
The agency said these measures had helped improve government revenue and should remain part of efforts to strengthen public finances.
It also called for more aggressive revenue mobilisation through tax reforms, expansion of the tax base, adoption of technology and improved tax compliance.
On public expenditure, the DMO advised the government to improve spending efficiency and prioritise investments capable of stimulating economic growth and expanding the revenue base.
The report further recommended that the government consider privatisation or the sale of selected public assets while relying more on concessional financing where available.
The DMO’s projections underscore the importance of increasing government revenue and managing borrowing costs as Nigeria navigates its fiscal challenges.
With debt servicing projected to absorb 71.7 per cent of Federal Government revenue by 2030 under the baseline scenario, the country’s ability to fund infrastructure, social programmes and essential public services could face additional pressure if revenue growth fails to keep pace with debt obligations.
The more severe shock scenario, which projects the ratio reaching 97.3 per cent by 2030, further demonstrates the potential consequences of exchange rate instability, weaker economic growth and revenue shortfalls.
Ultimately, the report places revenue generation, expenditure discipline and effective debt management at the centre of Nigeria’s long-term fiscal sustainability.
