The Nigerian Economic Summit Group (NESG) has warned that Nigeria remains in a high-risk fiscal environment despite signs of stability in some key debt indicators. The group cited persistent structural weaknesses, rising repayment pressure, and continued dependence on borrowing as areas of concern.
Debt Burden Index Shows Underlying Pressure
In its latest Debt Burden Monitor released on Monday, titled 'Debt pressure persists beneath surface stability: DBI signals elevated fiscal strain in 2025', the NESG stated that the country's fiscal condition remains fragile. Although the Debt Burden Index (DBI) declined to 70.9 points in 2024 from 83.6 points in 2023, suggesting a temporary easing of debt stress, the improvement was not driven by stronger fiscal capacity or major reforms.
'At face value, this suggests an easing of debt stress. However, this improvement was largely driven by a partial moderation in debt service pressures, rather than a fundamental strengthening of fiscal capacity,' the report noted.
Rising Debt-to-GDP Ratio
The think tank highlighted that Nigeria's public debt-to-GDP ratio rose sharply to 40.6 percent in 2024, reflecting continued reliance on borrowing to finance fiscal deficits and bridge revenue shortfalls. The divergence between the declining DBI and rising debt-to-GDP ratio indicates that the country's underlying fiscal vulnerability remains significant.
The NESG's review of Nigeria's 2025 debt outlook showed that debt pressure remained elevated throughout the year. The DBI rose to 78.4 points in the first quarter, peaked at 79.6 points in the second quarter, moderated slightly to 76.2 points in the third quarter, and closed the year at an estimated 79.2 points. 'This pattern indicates that debt pressure has not structurally eased but instead fluctuates within a high-stress band,' the report added.
Structural Imbalances Masked by Headline Ratios
The NESG said improvements in conventional debt ratios are masking deeper fiscal problems, stressing that Nigeria has yet to make a decisive shift towards debt sustainability. 'Overall, the 2024-2025 transition does not yet reflect a decisive shift toward debt sustainability. Rather, it signals a system making only marginal adjustments, with improvements in headline ratios masking persistent structural imbalances,' the report added.
The warning came after the Debt Management Office (DMO) disclosed that Nigeria's total public debt rose to N159.28 trillion as of December 31. The DMO also reported that debt service climbed to about N16 trillion during the year, driven by rising domestic interest payments and sustained external debt obligations, even as the country's debt structure remained largely tilted towards domestic borrowing.
Key Drivers of Fiscal Strain
The group identified debt service-to-revenue obligations as the major driver of fiscal strain, warning that liquidity pressure remains high despite changes in debt stock indicators. It also highlighted weak revenue mobilisation, structural revenue weaknesses, and persistent fiscal deficits as major concerns affecting the country's fiscal outlook.
According to the report, the apparent improvement in debt indicators was largely due to valuation effects rather than genuine fiscal strengthening. The NESG warned that unless major reforms are introduced to improve revenue generation and reduce fiscal leakages, Nigeria's rising debt burden could continue to threaten long-term economic growth and limit spending on infrastructure and social services.
Despite several warnings and calls for fiscal consolidation, the Federal Government continues to rely on debt to fund the budget. This year, the government is hoping to borrow N23.85 trillion to fund the budget. Some experts said the projected fiscal deficit could be exceeded as the country continues to struggle with a revenue crisis.
