By: ThinkBusiness Africa
Nigeria’s total public debt is projected to hit a staggering N175.5 trillion by the end of 2026, down from N159.1 trillion in 2025, according to the latest Macroeconomic Outlook from investment powerhouse CardinalStone.
While the figure is likely to trigger alarm bells across the country’s financial circles, the report—titled “Pathway to Sustainable Growth”—argues that the nominal “debt explosion” doesn’t tell the full story. In a surprising twist, analysts at the firm project that Nigeria’s debt-to-GDP ratio will actually settle at 34.5% by 2026.
This indicates that while the debt is growing, the economy is expected to expand even faster, effectively “diluting” the burden of the borrowing.
The projected climb to N175.5 trillion represents a significant leap from previous years, driven by a combination of persistent budget deficits and the high cost of servicing existing loans.
According to CardinalStone, several factors are pushing the needle: The government’s 2026 appropriation is expected to maintain heavy capital expenditure to address the country’s infrastructure deficit.
Although the report predicts a more stable Naira—projecting a range of N1,350 to N1,450 per dollar—the impact of previous devaluations has already permanently inflated the Naira value of Nigeria’s external debt.
“The increase in debt level reflects an organic increase, as the FX outlook remains largely positive.” CardinalStone noted.
With a 2026 budget deficit estimated at over N15 trillion, the government will remain heavily reliant on both domestic and international debt markets.
CardinalStone’s projection of a 34.5% debt-to-GDP ratio suggests that Nigeria is moving toward a more sustainable fiscal position.
This improvement is largely credited to a projected surge in Nominal GDP, which is expected to cross the N500 trillion mark by 2026. This growth is anticipated to be fueled by a recovery in oil production (projected at 1.75 million barrels per day) and a resilient services sector.
“After nearly a decade of growth averaging about 2.0%, we expect the economy to find a new level of 4.4% in 2026,” the report stated, suggesting that the era of stagnation may finally be ending.
Despite the optimistic GDP ratio, the “elephant in the room” remains revenue. Debt servicing is still expected to gulp a significant portion of the federation’s income.
Last December, the government budgeted N15.52 trillion for debt servicing in the 2026 budget appropriation, representing over 25% of its total revenue for the fiscal year.
To mitigate this, CardinalStone highlights the importance of the 2025 Tax Act and ongoing fiscal reforms. The firm notes that for the 34.5% projection to hold, the government must succeed in broadening the tax base without stifling the private sector—a delicate balancing act as the country approaches a pre-election year.
Looking ahead on monetary policy support, CardinalStone predicts a 300 to 400 basis point cut in interest rates by the Central Bank of Nigeria (CBN) as inflation begins to cool toward a year-end target of 13.9%. This move could potentially lower the cost of domestic borrowing for the government, further easing the debt pressure.
