Nigeria’s Debt Burden: Servicing costs to consume 72% of FG revenue by 2030 – DMO
Nigeria could spend nearly three-quarters of its Federal Government revenue servicing debt by 2030, raising concerns over the country’s capacity to finance infrastructure, social services and other development priorities without further borrowing.
The Debt Management Office (DMO), in its 2024 Debt Sustainability Analysis (DSA), projects that the Federal Government’s debt service-to-revenue ratio will climb to 71.7 per cent by 2030 under its baseline scenario, significantly exceeding its recommended 50 per cent threshold.
The projection highlights a growing fiscal vulnerability: even if Nigeria succeeds in reducing its debt relative to the size of its economy, the cost of servicing existing obligations could continue to absorb an increasing proportion of government earnings.
The DMO’s estimates show that the debt service-to-revenue ratio, which stood at 60.6 per cent in 2024, is expected to decline to 44.9 per cent in 2025 before rising above the recommended threshold to 51 per cent in 2026.
The pressure is projected to intensify over subsequent years, with the ratio increasing to 57.1 per cent in 2027, 57.4 per cent in 2028 and 67.3 per cent in 2029, before reaching 71.7 per cent in 2030.
This means that for every N100 generated by the Federal Government in 2030, approximately N71.70 could be required to meet debt servicing obligations, leaving just N28.30 before other government expenditure commitments.
The risk becomes more severe under the DMO’s shock scenario, which projects the debt service burden rising to 97.3 per cent of Federal Government revenue by 2030.
Under this scenario, the ratio is expected to increase from 44.9 per cent in 2025 to 57.4 per cent in 2026, 70.9 per cent in 2027 and 75.3 per cent in 2028. It is projected to reach 89.6 per cent in 2029 before approaching the entirety of government revenue in 2030.
The stress scenario assumes a 30 per cent exchange rate depreciation, a two per cent decline in real Gross Domestic Product (GDP) and a 2.5 per cent reduction in government revenue.
By comparison, the baseline scenario assumes an exchange rate of N1,500 to the dollar, real GDP growth of 4.8 per cent and a primary balance of 3.8 per cent.
The projections expose the underlying weakness in Nigeria’s public finance structure, where debt servicing continues to grow faster than revenue, making the government increasingly vulnerable to exchange-rate shocks, weaker economic activity and fluctuations in borrowing costs.
Interestingly, the DMO projects that Nigeria’s public debt-to-GDP ratio will decline significantly from 53.7 per cent in 2024 to 27.3 per cent by 2030 under the baseline scenario. Under the shock scenario, it is projected at 34.6 per cent.
However, the lower debt-to-GDP projection does not necessarily translate into improved capacity to meet debt obligations. The more immediate challenge is the relationship between government earnings and the cash required to service accumulated liabilities.
The DMO consequently described Nigeria’s public debt sustainability as moderate but highly vulnerable to weak revenue mobilisation, exchange-rate depreciation and global economic uncertainties.
It also identified significant financing, refinancing and foreign exchange risks within the country’s debt portfolio.
Nigeria’s average Eurobond spread stood at 975.58 basis points between October 2 and December 31, 2024, considerably above the DMO’s 600-basis-point threshold. The elevated spread reflects the higher risk premium demanded by investors and the potential cost of raising fresh international debt.
The agency also identified an annual 1.8 per cent change in the share of short-term debt in total public debt, exceeding its one per cent threshold, partly because of increased Nigerian Treasury Bills issuance and associated refinancing risks.
Additionally, non-residents held 49 per cent of Nigeria’s public debt, above the 45 per cent threshold, exposing the country’s debt portfolio to foreign exchange and international capital market risks.
The implications are already visible in government expenditure. Nigeria spent $1.82 billion servicing external debt in the first half of 2026, although the amount represented a 21.5 per cent decline from $2.32 billion recorded in the corresponding period of 2025.
Domestic debt servicing was considerably higher, with the Federal Government spending N5.28 trillion in the first half of 2026, including N4.95 trillion in interest and rental payments.
Between June 2023 and December 2025, additional debt-service costs amounted to N10.61 trillion, approximately N4.14 trillion more than the N6.47 trillion spent on strategic infrastructure development over the same period.
Against this background, the DMO recommended sustaining the removal of the Premium Motor Spirit (PMS) subsidy and maintaining a unified and flexible exchange-rate regime, which it said had contributed to improved government revenue.
It also called for stronger revenue mobilisation through tax reforms, expansion of the tax base, technology adoption and improved compliance, alongside better expenditure management and prioritisation of growth-enhancing investments.
Other recommendations include considering privatisation or the sale of public assets and increasing reliance on concessional financing where available to reduce borrowing costs.
For Nigeria, the central fiscal challenge is no longer simply how much government borrows, but how much revenue remains after meeting the cost of existing obligations. Unless revenue growth consistently outpaces debt servicing, the country’s ability to fund infrastructure, healthcare, education and other essential services will remain under increasing pressure
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