Nigeria could spend more than two-thirds of its Federal Government revenue on servicing debt by 2030, raising concerns about the resources available for infrastructure and other public services.
The projection is contained in the Debt Management Office’s (DMO) 2024 Debt Sustainability Analysis, which estimates that the country’s debt service-to-revenue ratio could rise to 71.7 per cent by 2030 under its baseline scenario.
The forecast exceeds the DMO’s recommended threshold of 50 per cent, indicating that debt repayment obligations could take up an increasing share of government earnings over the coming years.
The report puts the ratio at 60.6 per cent in 2024 before projecting a temporary decline to 44.9 per cent in 2025.
However, the figure is expected to climb to 51 per cent in 2026 and continue rising to 57.1 per cent in 2027 and 57.4 per cent in 2028. By 2029, debt servicing is projected to account for 67.3 per cent of Federal Government revenue before reaching 71.7 per cent in 2030.
The DMO also examined a more difficult economic scenario involving a 30 per cent depreciation of the naira, a two per cent decline in real Gross Domestic Product (GDP) and a 2.5 per cent reduction in government revenue.
Under this adverse scenario, the debt service-to-revenue ratio could rise to 97.3 per cent by 2030, suggesting that nearly all Federal Government revenue could be required to meet debt servicing obligations.
Debt-to-GDP Ratio Projected To Decline
Interestingly, the analysis presents a different picture when Nigeria’s public debt is measured against the size of its economy. Under the baseline scenario, the public debt-to-GDP ratio is projected to fall from 53.7 per cent in 2024 to 27.3 per cent by 2030.
This contrast highlights the difference between the size of a country’s economy and the revenue its government can actually generate to meet financial obligations.
Although a declining debt-to-GDP ratio may indicate an improvement in the country’s debt position relative to economic output, the rising debt service-to-revenue projection points to continued pressure on government finances.
A growing share of public revenue committed to debt repayment could also leave the government with fewer resources to finance capital projects, infrastructure, healthcare, education and security.
The projections further highlight the importance of improving revenue collection, strengthening the domestic revenue base and managing foreign exchange exposure to reduce pressure on public finances.
