Nigeria may spend 71.7% of revenue servicing debt by 2030 – DMO

Nigeria could devote more than 70 per cent of its Federal Government revenue to debt repayments by 2030, raising concerns about the resources available to fund public services and infrastructure.

The projection is contained in the 2024 Debt Sustainability Analysis report released by the Debt Management Office (DMO), which examines the country’s ability to meet its financial obligations over the coming years.

The report estimates that debt servicing will account for 60.6 per cent of government revenue in 2024 before dropping to 44.9 per cent in 2025. However, the ratio is expected to climb again, reaching 51 per cent in 2026 and 57.1 per cent in 2027.

Further increases are projected for subsequent years, with the figure expected to rise to 57.4 per cent in 2028, 67.3 per cent in 2029 and 71.7 per cent by 2030.

The projected 2030 figure is significantly above the DMO’s 50 per cent threshold, suggesting that debt obligations could take an increasingly large share of government earnings.

The agency identified weak revenue generation, currency depreciation, inflation and rising debt service costs among the factors threatening the country’s debt sustainability.

An alternative economic scenario presented in the report paints a more difficult picture, with the debt service-to-revenue ratio potentially reaching 97.3 per cent by 2030 if economic conditions deteriorate and revenue performance weakens.

Despite the growing repayment burden, Nigeria’s public debt-to-GDP ratio is projected to decline from 53.7 per cent in 2024 to 27.3 per cent in 2030 under the baseline scenario.

DMO warned that a lower debt-to-GDP ratio does not remove the pressure created by the increasing cost of servicing government debt relative to revenue.

To reduce the risks, the agency urged the Federal Government to strengthen revenue collection through tax reforms, broaden the tax base, improve compliance and ensure more efficient public expenditure.

It also recommended limiting fresh borrowing, exploring public-private partnerships for infrastructure financing, considering the sale of government assets and making greater use of concessional loans.

The report further advised the government to sustain fiscal reforms, including the removal of the petrol subsidy and the implementation of a unified and flexible foreign exchange regime.

Nigeria’s total public debt stood at N133.33 trillion as of December 31, 2024, according to the DMO.

The projections highlight the importance of improving government revenue to prevent debt repayments from further restricting funds available for other national priorities.