- Nigeria’s Debt Service Burden Could Reach 71.7% Of Federal Revenue By 2030
Nigeria’s public debt could become smaller relative to the economy while taking a larger share of government income. That tension sits at the centre of the Debt Management Office’s 2024 Debt Sustainability Analysis, which projects that debt service could consume 71.7% of Federal Government revenue by 2030 under its baseline scenario.
The projection means that, for every naira of federal revenue, about 72 kobo could be committed to servicing debt. The remaining 28 kobo would have to cover all other federal responsibilities, including salaries, transfers to other levels of government, public services and capital investment.
The DMO’s table shows the debt service-to-revenue ratio falling from 60.6% in 2024 to 44.9% in 2025, before rising to 51.0% in 2026, 57.1% in 2027, 57.4% in 2028 and 67.3% in 2029. The 2030 baseline estimate of 71.7% is well above the 50% limit adopted by the DMO in its analysis.
The report says the IMF–World Bank framework does not set a threshold for this ratio, but explains that the DMO used the 50% limit because of Nigeria’s relatively high debt-service burden.
There is an important qualification: this is a scenario projection, not a certainty. The baseline assumes an exchange rate of N1,500 to the US dollar, real GDP growth of 4.8% and a primary balance surplus of 3.8%.
These assumptions, based on the 2025 Appropriation Act and the 2025–2027 Medium-Term Fiscal Framework and Fiscal Strategy Paper, shape the model’s path. If economic conditions, revenue or borrowing costs differ, the result could also change.
The report’s own stress test shows how sensitive the outlook may be. Under its shock scenario, the debt service ratio rises to 57.4% in 2026, 70.9% in 2027, 75.3% in 2028 and 89.6% in 2029, reaching 97.3% by 2030.
The model assumes a 30% depreciation of the naira, a 2% decline in real GDP and a 2.3% fall in revenue. At that level, almost all federal revenue would be taken up by debt service, leaving minimal space for other spending.
The sharp rise in the ratios reflects a basic fiscal problem: debt service is projected to grow faster than federal revenue. It is also why the DMO’s analysis tells a more complicated story than a conventional debt-to-GDP measure alone.
Under the baseline, the table projects total public debt falling from 53.7% of GDP in 2024 to 27.3% in 2030. That appears to be a marked improvement in the country’s debt position relative to the size of its economy.
Yet the same table projects debt service taking a rising share of federal revenue over the period. A declining debt-to-GDP ratio, therefore, does not automatically mean the government has more room in its annual budget.
The distinction matters because debt-to-GDP compares outstanding public debt with the value of the whole economy, while debt service-to-revenue measures the annual cash burden against the income available to the Federal Government.
A country may have a debt stock that appears manageable relative to GDP but still struggle to meet repayment and interest obligations from a narrow revenue base.
Debt service in the DMO’s table includes principal repayments, interest and other charges on federal external and domestic debt.
Revenue is the figure supplied by the Budget Office of the Federation. The ratio is thus broader than an interest-to-revenue calculation: it captures scheduled repayment obligations as well as interest costs.
The report itself describes the fiscal implications plainly: “This ratio is high and the fiscal space available to the Government is limited.” It concludes that the pressure on revenue relative to debt service poses a threat to debt sustainability, even though the debt-to-GDP projections remain below the benchmarks used in the analysis.
The DMO assesses overall debt sustainability as moderate, but says it remains highly vulnerable to weak revenue mobilisation, exchange-rate depreciation and global uncertainty.
The risk assessment adds weight to that warning. The DMO records an average bond spread of 976 basis points against a 600-point benchmark, an annual increase in the share of short-term debt of 1.8% against a 1% threshold, and a 49% share of foreign-currency public debt held by non-residents against a 45% benchmark.
The office classifies each of those indicators as high risk. Short-term debt can increase refinancing exposure, while foreign-currency debt leaves the government more exposed to exchange-rate movements.
The projections also require careful reading because the DSA was prepared with 2024 as its base year and a five-year projection period through 2030. The report was published on November 9, 2026.
Its figures should be understood as results from the specified model and assumptions, rather than a real-time forecast updated to every subsequent fiscal or market development.
There is also an internal discrepancy in the report that deserves attention. Table 1 places the baseline debt service-to-revenue ratio at 71.7% in 2030, while the conclusion section gives 72.6%. For the shock scenario, the table gives 97.3%, while the conclusion states 97.7%.
The headline projection of 71.7% is the value in the summary table, but the difference should be clarified in any official use of the DSA.
The DMO’s recommendations point to the central policy challenge: improving recurring revenue while controlling the growth and cost of debt. It calls for tax reforms to widen the tax base and improve compliance through technology, more efficient public spending, and investment in projects that can support growth and revenue generation.
It also recommends reducing new borrowing through public-private partnerships, relying more on concessional financing where available, and considering privatisation or the sale of government assets.
These options are not interchangeable. Asset sales can provide proceeds, but they are one-off and cannot permanently correct a gap between recurrent revenue and recurrent debt obligations. Public-private partnerships may shift the timing or allocation of financing, but they still require careful assessment of future fiscal commitments.
Concessional loans can reduce borrowing costs, but they do not remove the need to repay. More durable relief depends on raising predictable revenue and ensuring that borrowing finances productive assets rather than merely postponing fiscal pressure.
The report also recommends sustaining the removal of the petrol subsidy and maintaining a unified, flexible exchange rate, saying these reforms have helped boost revenue. Their fiscal effect must be weighed alongside their impact on households and businesses.
If revenue gains are not translated into better-targeted support and visible improvements in public services, reforms may become harder to sustain politically. Fiscal consolidation depends not only on the size of the revenue line, but also on public confidence in how that revenue is collected and spent.
Nigeria’s challenge, then, is not simply to reduce the debt stock. It is to make the federal revenue base broad and strong enough to meet debt obligations without crowding out the state’s other responsibilities.
The DMO’s 2030 projection is a warning about that test: a lower debt ratio can coexist with a tighter budget, and the decisive variable may be how quickly government revenue grows compared with the cost of servicing debt.
