Growth, reserves and inflation are improving, but the DMO’s own projections show debt service outpacing revenue.
Nigeria’s macroeconomic gains are real, but they will not last if rising debt service keeps absorbing the revenue that should fund hospitals, schools and roads. The central question is not how large the debt is, but whether the country earns enough to service it.
The numbers are moving the wrong way. According to the World Bank’s International Debt Report 2026, Nigeria’s total external debt, which includes private-sector and other non-government obligations, reached about $145 billion at end-2025. That is up 6.6% on 2024 and well above the roughly $83 billion of 2015. The Debt Management Office (DMO) reports a lower figure for official public external debt, around $50–55 billion, but the trajectory is upward on both measures.
The DMO’s 2024 Debt Sustainability Analysis projects that debt service will consume 71.7% of federal revenue by 2030 in its baseline scenario, far above its own 50% threshold. The path is not a straight line. The ratio is projected to dip to 44.9% in 2025 before crossing 50% in 2026 and climbing each year after that.
President Bola Tinubu has said that, in pursuit of a one-trillion-dollar economy, “the real question is not how much we borrow, but what we build, what value we create and what future we leave behind”.
The problem is that, after the 2006 World Bank/Paris Club debt relief, immediate past and present Nigerian administrations continuously expanded public debt while corruption and structural inefficiencies persisted. The immediate outcome of this borrowing cycle has been a complete reversal of the gains made in 2006. The unceasing expansion of public debt following the 2006 Paris Club debt relief has resulted in Nigeria returning to a severe debt trap, where debt servicing now consumes the largest chunk of federal revenue and threatens economic growth.
The administration deserves credit for hard choices made since May 2023 including removing the petrol subsidy, unifying the exchange rate and curbing fiscal leakages. GDP grew 4.48% in the second quarter of 2026, up from 3.89% in the first quarter and 4.23% a year earlier, according to the National Bureau of Statistics. Inflation has eased to 15.39% as of August, and foreign-exchange reserves stand at about $54.7 billion. But stability on paper becomes a better life only if the revenue to sustain it exists.
That is where the risk lies, and how heavy the burden looks depends on the measure. The Finance Ministry says full-year debt service fell below 60% of revenue in 2025 and cites a World Bank projection of 46% for 2026. The World Bank’s interest-only ratio for the first half of 2026 is far higher, at 124% of revenue, a figure the ministry disputes. The DMO itself describes sustainability as moderate but highly vulnerable to weak revenue, currency depreciation and global shocks. Whichever number one prefers, a large share of revenue goes to creditors. Much of the borrowing since the 2006 Paris Club relief has also financed overheads and salaries rather than productive capital projects.
Revenue is the binding constraint. Nigeria’s tax-to-GDP ratio is about 12–13%, against a target of 18% by around 2030. A large informal economy, weak collection, compliance gaps and continued dependence on oil limit what the government can raise. Without more domestic revenue, every new loan is repaid from a thin base.
Currency exposure magnifies the problem. About 40–45% of public debt is denominated in foreign currency, so any naira depreciation raises the cost of servicing it. Total public debt reached ₦159.28 trillion ($111 billion) at end-2025, and part of that rise reflects currency devaluation rather than new borrowing. In 2025, external debt stood at 212% of exports and external debt service at 19% of exports, leaving little room to absorb an export or currency shock.
Financing is getting costlier. As Nigeria shifts from concessional to commercial borrowing, private creditors charged an average of about 9.6% in 2025, against 1.9% from official creditors. External debt service reached $1.82 billion in the first half of 2026, and a further $7.7 billion in external borrowing has been proposed.
Even the reassuring headline can mislead. The DMO expects debt-to-GDP to fall from 53.7% in 2024 to 27.3% by 2030, but GDP is not the revenue available to repay creditors. That decline depends on growth, productivity and oil revenue meeting expectations. If they fall short, the underlying weakness will show.
The way forward is measurable:
▪ Set and publish annual tax-to-GDP milestones on the path to 18%, so progress can be judged each year.
▪ Tie new borrowing to capital projects with defined returns, not recurrent spending.
▪ Prefer concessional and naira-denominated financingwhere possible, to limit currency risk.
▪ Require the DMO to publish an updated debt sustainability analysis, including its redemption profile and gross financing needs.
None of this is radical. It is the discipline that turns a good year of growth into lasting fiscal strength.
Nigeria’s debt can be sustainable, but only if revenue grows faster than the interest bill. Until it does, the country’s stability will rest on borrowed time.
Nosa Igbinadolor is an Economist. He is a Partner with Path Strategy Consulting
Nigeria’s Debt Problem Is a Revenue Problem
Growth, reserves and inflation are improving, but the DMO’s own projections show debt service outpacing revenue.
Nigeria’s macroeconomic gains are real, but they will not last if rising debt service keeps absorbing the revenue that should fund hospitals, schools and roads. The central question is not how large the debt is, but whether the country earns enough to service it.
The numbers are moving the wrong way. According to the World Bank’s International Debt Report 2026, Nigeria’s total external debt, which includes private-sector and other non-government obligations, reached about $145 billion at end-2025. That is up 6.6% on 2024 and well above the roughly $83 billion of 2015. The Debt Management Office (DMO) reports a lower figure for official public external debt, around $50–55 billion, but the trajectory is upward on both measures.
The DMO’s 2024 Debt Sustainability Analysis projects that debt service will consume 71.7% of federal revenue by 2030 in its baseline scenario, far above its own 50% threshold. The path is not a straight line. The ratio is projected to dip to 44.9% in 2025 before crossing 50% in 2026 and climbing each year after that.
President Bola Tinubu has said that, in pursuit of a one-trillion-dollar economy, “the real question is not how much we borrow, but what we build, what value we create and what future we leave behind”.
The problem is that, after the 2006 World Bank/Paris Club debt relief, immediate past and present Nigerian administrations continuously expanded public debt while corruption and structural inefficiencies persisted. The immediate outcome of this borrowing cycle has been a complete reversal of the gains made in 2006. The unceasing expansion of public debt following the 2006 Paris Club debt relief has resulted in Nigeria returning to a severe debt trap, where debt servicing now consumes the largest chunk of federal revenue and threatens economic growth.
The administration deserves credit for hard choices made since May 2023 including removing the petrol subsidy, unifying the exchange rate and curbing fiscal leakages. GDP grew 4.48% in the second quarter of 2026, up from 3.89% in the first quarter and 4.23% a year earlier, according to the National Bureau of Statistics. Inflation has eased to 15.39% as of August, and foreign-exchange reserves stand at about $54.7 billion. But stability on paper becomes a better life only if the revenue to sustain it exists.
That is where the risk lies, and how heavy the burden looks depends on the measure. The Finance Ministry says full-year debt service fell below 60% of revenue in 2025 and cites a World Bank projection of 46% for 2026. The World Bank’s interest-only ratio for the first half of 2026 is far higher, at 124% of revenue, a figure the ministry disputes. The DMO itself describes sustainability as moderate but highly vulnerable to weak revenue, currency depreciation and global shocks. Whichever number one prefers, a large share of revenue goes to creditors. Much of the borrowing since the 2006 Paris Club relief has also financed overheads and salaries rather than productive capital projects.
Revenue is the binding constraint. Nigeria’s tax-to-GDP ratio is about 12–13%, against a target of 18% by around 2030. A large informal economy, weak collection, compliance gaps and continued dependence on oil limit what the government can raise. Without more domestic revenue, every new loan is repaid from a thin base.
Currency exposure magnifies the problem. About 40–45% of public debt is denominated in foreign currency, so any naira depreciation raises the cost of servicing it. Total public debt reached ₦159.28 trillion ($111 billion) at end-2025, and part of that rise reflects currency devaluation rather than new borrowing. In 2025, external debt stood at 212% of exports and external debt service at 19% of exports, leaving little room to absorb an export or currency shock.
Financing is getting costlier. As Nigeria shifts from concessional to commercial borrowing, private creditors charged an average of about 9.6% in 2025, against 1.9% from official creditors. External debt service reached $1.82 billion in the first half of 2026, and a further $7.7 billion in external borrowing has been proposed.
Even the reassuring headline can mislead. The DMO expects debt-to-GDP to fall from 53.7% in 2024 to 27.3% by 2030, but GDP is not the revenue available to repay creditors. That decline depends on growth, productivity and oil revenue meeting expectations. If they fall short, the underlying weakness will show.
The way forward is measurable:
▪ Set and publish annual tax-to-GDP milestones on the path to 18%, so progress can be judged each year.
▪ Tie new borrowing to capital projects with defined returns, not recurrent spending.
▪ Prefer concessional and naira-denominated financingwhere possible, to limit currency risk.
▪ Require the DMO to publish an updated debt sustainability analysis, including its redemption profile and gross financing needs.
None of this is radical. It is the discipline that turns a good year of growth into lasting fiscal strength.
Nigeria’s debt can be sustainable, but only if revenue grows faster than the interest bill. Until it does, the country’s stability will rest on borrowed time.
Nosa Igbinadolor is an Economist. He is a Partner with Path Strategy Consulting
Nosa Igbinadolor
ThinkBusiness Africa
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