Nigeria's Federal Government will spend 71.7 per cent of its revenue servicing debt by 2030 under the baseline scenario, according to the Debt Management Office's 2024 Debt Sustainability Analysis. The projection breaches the government's self-imposed limit of 50 per cent and signals a sustained squeeze on the fiscal space (the revenue left after debt obligations) available for infrastructure and social spending.

The debt service-to-revenue ratio stood at 60.55 per cent in 2024, already above the 50 per cent threshold. The DMO projects the ratio will cross that line permanently from 2026, reaching 51 per cent that year, 57.1 per cent in 2027 and 67.3 per cent in 2028.

Under a more adverse scenario combining exchange rate depreciation, weaker growth and declining revenue, the ratio climbs to 97.3 per cent by 2030. The DMO's shock scenario traces the deterioration from 57.4 per cent in 2026 to 97.7 per cent in 2030.

"The rise in this ratio is due to the fact that the rate of growth in Debt Service is higher than rate of growth of Revenue," the report stated. "The two scenarios show a threat to debt sustainability, due to increasing pressure on Government Revenue relative to Debt Service."

How large is Nigeria's debt stock?

Total public debt reached N144.67 trillion as of December 31, 2024, up from N27.40 trillion in 2019. The figure covers domestic and external obligations of the Federal Government, the 36 states and the Federal Capital Territory, and currently stands at N166.788 trillion as of June 2026.

The debt-to-GDP ratio rose to 53.72 per cent in 2024 from 19 per cent in 2019. The DMO attributed the increase to sustained borrowing for budget deficits, the securitisation of Ways and Means Advances (central bank overdrafts to government converted into tradable debt) and naira depreciation on external debt.

Federal Government debt service obligations rose to N12.62 trillion in 2024 from N7.53 trillion in 2023. Revenue rose to N20.84 trillion from N11.74 trillion over the same period, which kept the debt service ratio in decline — from 64.14 per cent in 2023 to 60.55 per cent in 2024.

That improvement followed the removal of the petrol subsidy, exchange rate unification and better remittance management from government-owned enterprises, the report noted.

Where does the vulnerability lie?

The DMO classified Nigeria's overall public debt as sustainable at a moderate level but rated financing risk as high. The average bond spread stood at 976 basis points, above the 600 basis points threshold under the IMF–World Bank debt sustainability framework.

The specific pressure points the office identified:

• Refinancing risk: rated high, with the annual change in short-term debt's share of total public debt at 1.8, above the 1.0 threshold, driven by increased issuance of Nigerian Treasury Bills.
• Non-resident exposure: debt held by non-residents accounted for 49 per cent of total debt, exceeding the 45 per cent threshold and exposing the country to foreign exchange and market sentiment risk.
• Currency-denominated debt: classified as moderate at 50 per cent of total debt, below the 60 per cent threshold.

"The Eurobond Bond (7.375% US$1.5 billion September 2033) average spread of 975.58 basis points (from October 02, 2024 through December 31, 2024) exceeded its threshold of 600 basis points, which reflect increase in yield, indicating an increase in the cost of new borrowings," the report stated.

What do the stress tests show?

The DMO's stress test modelled adverse movements in exchange rates, inflation, interest rates, economic growth and the primary balance. It projected the debt-to-GDP ratio could reach 47 per cent in 2027, against 38.2 per cent under the baseline.

Debt service-to-revenue could rise to 70.6 per cent in 2027 under stress conditions, well above the 50 per cent limit. The office warned the trajectory could exceed the 70 per cent high-risk benchmark if growth weakens and borrowing costs rise.

What does the DMO recommend?

The report set out a package of measures to reduce the identified vulnerabilities:

• Stronger revenue mobilisation through tax reforms, base expansion, improved compliance and technology-driven tax administration.
• Greater public expenditure efficiency, channelling resources to growth-enhancing investments that generate additional revenue.
• Reduced new borrowing, with capital projects financed through public-private partnerships.
• Compliance with the Fiscal Responsibility Act and CBN Act provisions on Ways and Means Advances.
• Privatisation or sale of government assets, alongside greater reliance on concessional financing.

The DMO added that sustaining the removal of the petrol subsidy and maintaining a unified, flexible exchange rate regime remain central to improving revenue and moderating debt sustainability risks.