Nigeria’s Debt Service Could Absorb 71.7% of Federal Revenue by 2030, DMO Projects

ABUJA – Nigeria’s debt service bill is projected to take 71.7% of Federal Government revenue by 2030 under a baseline scenario, well above the 50% ceiling recommended by the Debt Management Office (DMO), according to the agency’s 2024 Debt Sustainability Analysis released on Monday.

The projections

The DMO expects the ratio to fall from 60.6% in 2024 to 44.9% in 2025 before climbing back above the 50% threshold in 2026, Nairametrics reported. Under the baseline it reaches 57.1% in 2027, 57.4% in 2028, 67.3% in 2029 and 71.7% in 2030.

The agency attributes the increase to debt servicing growing faster than revenue. The baseline assumes an exchange rate of N1,500 to the dollar and real GDP growth of 4.8%. A shock scenario, with a 30% currency depreciation, a 2% fall in real GDP and a 2.5% cut in revenue, pushes the ratio to 97.3% by 2030.

A falling debt burden, a rising cost

The report projects public debt-to-GDP falling to 27.3% by 2030 under the baseline, or 34.6% under the shock scenario. That improvement does not ease the core problem, which is the cost of debt relative to the revenue available to pay it. Total public debt stood at N166.79 trillion at the end of June 2026, according to DMO data.

The DMO described Nigeria’s debt sustainability as moderate but highly vulnerable to weak revenue, currency depreciation and global uncertainty. Several risk indicators exceeded its thresholds. The average Eurobond spread was 975.58 basis points in late 2024, against a 600-basis-point threshold.

Non-residents held 49% of public debt, above a 45% threshold, and the share of short-term debt rose faster than the agency’s limit as Treasury bill issuance increased.

Recommended reforms

The DMO urged the government to keep the petrol subsidy removal and a unified, flexible exchange rate, which it said had helped revenue. It also called for tax reform, a wider tax base, better compliance, more efficient spending, possible asset sales and greater use of concessional finance.

Why it matters

For bondholders, the analysis frames revenue as the variable to watch. A debt service ratio above 50% leaves less room for infrastructure and social spending and keeps refinancing risk in focus, particularly with almost half of public debt held by non-residents.

For other African sovereigns, including Botswana, Nigeria’s figures are a reminder that falling debt-to-GDP ratios can mask a rising interest burden when revenue lags. In our view, rating agencies and Eurobond investors are likely to weigh the revenue side of the reform programme closely in coming budget cycles.

Sources

• Nairametrics: Nigeria’s debt service-to-revenue ratio to hit 71.7% by 2030 – DMO
• DMO: Nigeria’s total public debt as at June 30, 2026