The Debt Management Office has projected that debt service will absorb 71.7 percent of Federal Government revenue by 2030 under its baseline outlook, far above the 50 percent ceiling the agency considers prudent.
The figures appear in the DMO's 2024 Debt Sustainability Analysis, published on Monday. The 2023 edition had not been released at the time the report was filed.
Under the baseline path, the debt service-to-revenue ratio is expected to fall from 60.6 percent in 2024 to 44.9 percent in 2025, before crossing the 50 percent mark again in 2026. From there, the ratio is projected to climb steadily: 51 percent in 2026, 57.1 percent in 2027, 57.4 percent in 2028, 67.3 percent in 2029 and 71.7 percent in 2030.
In an adverse scenario, the ratio would deteriorate faster, rising from 44.9 percent in 2025 to 57.4 percent in 2026, 70.9 percent in 2027 and 75.3 percent in 2028, then reaching 89.6 percent in 2029 and 97.3 percent in 2030. The shock assumptions include a 30 percent exchange rate depreciation, a 2 percent contraction in real GDP and a 2.5 percent revenue decline. The baseline, by contrast, assumes an exchange rate of N1,500 to the dollar, real GDP growth of 4.8 percent and a primary balance of 3.8 percent.
The DMO attributes the worsening ratio to debt service expanding more quickly than revenue.
Even so, the public debt-to-GDP ratio is forecast to ease from 53.7 percent in 2024 to 27.3 percent by 2030 under the baseline, and to 34.6 percent under the shock scenario. The report cautions that a lower debt-to-GDP ratio does not remove concerns about the burden of servicing obligations relative to revenue.
The DMO describes Nigeria's public debt sustainability as moderate but highly exposed to weak revenue mobilisation, currency devaluation and global uncertainty. Financing, refinancing and foreign exchange risks remain elevated. The average Eurobond spread reached 975.58 basis points between October 2 and December 31, 2024, above the 600-basis-point threshold, reflecting higher borrowing costs. The annual change in the share of short-term debt in total public debt was 1.8 percent, exceeding the 1 percent threshold, a trend linked to increased Nigerian Treasury Bills issuance. Non-residents held 49 percent of public debt, above the 45 percent threshold.
