Nigeria’s Rising Debt: Experts Warn of Urgent Action Amid Fiscal Uncertainty
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Nigeria’s growing debt burden demands immediate intervention to prevent further deterioration, investment analysts at Afrinvest have warned, as concerns mount over the country’s fiscal sustainability.
Their latest macroeconomic update, Nigeria’s Debt Statistics… High Risk or Not?, follows a visit by the International Monetary Fund’s (IMF) First Deputy Managing Director, Gita Gopinath, who assessed Nigeria’s debt risk as “moderate” but cautioned against complacency.
“We assess debt sustainability for countries every year, and we did this for Nigeria in our report for 2024,” Gopinath stated. “Our assessment was that the risk of sovereign stress for Nigeria is moderate and not high risk.” However, she warned that with interest payments consuming 75% of government revenue, Nigeria had little fiscal space for social and developmental spending. “To ensure debt remains manageable, it is crucial to mobilise more domestic revenue,” she added.
Gopinath also underscored the importance of directing savings from fuel subsidy removal into government reserves rather than inefficient spending.
Debt Soars to Record Levels
Afrinvest analysts, while aligning with the IMF’s broader concerns, stressed that Nigeria’s debt trajectory required urgent corrective measures. Citing data from the Debt Management Office (DMO), they highlighted that total public debt had surged to ₦142.3tn in the third quarter of 2024—the highest nominal level on record—driven by a widening budget deficit and the depreciation of the naira.
According to their report, domestic debt rose 3.3% quarter-on-quarter to ₦73.4tn, while external debt increased 9.2% to ₦68.9tn, reflecting an 80.2% annual surge due largely to currency depreciation. The debt-to-GDP ratio has now climbed to 52.8%, exceeding the government’s 40% target and nearing the 55% risk threshold for developing economies.
Despite government assurances, experts remain wary of Nigeria’s fiscal trajectory. Speaking at the KPMG 2025 Budget Day event, the Minister of Budget and Economic Planning, Atiku Bagudu, argued that “innovative financing” mechanisms, including local bond issuances, would ease debt servicing obligations. “If, as we anticipate, economic conditions continue to improve, we may not need to spend as much on debt service,” Bagudu said.
A Big-Spending Government?
Yet, concerns persist over Nigeria’s fiscal management. Jimi Ogbobine, head of Agusto Consulting, suggested that the current administration’s spending patterns were exacerbating the fiscal deficit. “Nigeria’s debt sustainability is a key worry point,” Ogbobine remarked at Agusto & Co.’s 2025 Economic Roundtable. “This government is a big-spending government, which is why debt sustainability remains a critical concern.”
With Nigeria’s fiscal deficit exceeding the 3% GDP threshold outlined in the Fiscal Responsibility Act, analysts warn that without structural reforms—including stronger tax collection and more disciplined expenditure—the nation risks veering towards a debt crisis. As policymakers weigh their options, the question remains: can Nigeria steer its way out of mounting fiscal pressure, or will it inch closer to unsustainable debt levels?
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