Nigeria’s rising debt burden is increasingly tied to weak revenue generation rather than excessive borrowing alone, leaving the government with limited resources for development.
With an average debt service-to-revenue ratio of about 70.7 per cent over the past three years, a large share of government income is spent on servicing existing loans. Although this ratio declined from nearly 100 per cent in previous years to 68 per cent in 2023 and 60 per cent in 2024 following fiscal reforms, recent figures suggest renewed pressure, as debt servicing consumed 84 per cent of revenue in the first half of last year.
At the same time, recurrent expenditure has consistently exceeded revenue, averaging 127 per cent between 2022 and 2025. This indicates that the government continues to borrow to fund routine expenses, a practice that contradicts fiscal regulations requiring loans to be used mainly for capital projects. While there was some improvement in 2024, the trend has shown signs of reversal.
Nigeria’s total public debt rose to N159.28 trillion by the end of last year, reflecting continued reliance on borrowing to cover fiscal deficits, which are projected at nearly N24 trillion in the current budget. External debt has also grown steadily, increasing the country’s exposure to foreign exchange risks and rising global interest rates.
Global financial conditions are expected to worsen, with projections showing rising debt levels worldwide. Higher borrowing by major economies could push up interest rates and strengthen the dollar, making it more expensive for countries like Nigeria to service external loans. This poses additional risks given the country’s growing dollar-denominated debt.
Experts warn that the country’s debt sustainability is undermined by structural weaknesses, including low revenue generation, high recurrent spending, and limited investment in productive sectors. Concerns have also been raised about the lack of transparency in borrowing and the weak link between loans and revenue-generating projects.
Economists argue that without stronger economic productivity—particularly in sectors like agriculture and manufacturing—government revenue will remain insufficient, forcing continued borrowing. They also stress the need for better fiscal discipline, improved project execution, and clearer accountability in loan management.
While borrowing is not inherently problematic, analysts note that its benefits depend on how effectively funds are used. Investments in infrastructure and key industries could support growth and improve repayment capacity, but inefficient spending and poor project selection risk deepening the country’s financial challenges.
