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The Nigerian Economic Summit Group (NESG) has warned that Nigeria remains firmly in a high-risk debt environment, despite recent signs of fiscal improvement, stressing that weak revenue generation and persistent structural imbalances continue to undermine long-term debt sustainability.
In its latest report titled; “Debt pressure persists beneath surface stability: DBI signals elevated fiscal strain in 2025,” the policy think tank said the country’s apparent fiscal gains mask deeper vulnerabilities driven by continued borrowing and rising spending pressures.
According to the NESG, Nigeria’s Debt Burden Index (DBI), a wider measure of fiscal stress beyond conventional debt ratios, fell to 70.9 points in 2024, down from 83.6 points in 2023. However, the group cautioned that the improvement does not reflect a meaningful turnaround in the country’s debt sustainability outlook.
“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 stated.
The NESG explained that the temporary decline in the index was largely driven by short-term relief in debt servicing pressures, rather than stronger revenue mobilisation or deep fiscal reforms. It added that Nigeria’s public finance system remains heavily exposed to shocks due to its narrow revenue base and reliance on borrowing.
Despite the drop in the DBI, Nigeria’s debt-to-GDP ratio rose sharply to 40.6 per cent in 2024, reflecting continued dependence on debt to finance budget deficits and sustain government operations.
The group also projected volatility in the country’s fiscal position going into 2025, with the DBI expected to rise again to 78.4 points in Q1, 79.6 points in Q2, easing slightly to 76.2 points in Q3, before closing the year at 79.2 points in Q4.
“The 2025 DBI trajectory reinforces concerns,” the report noted.
“Quarterly estimates show that the DBI remains elevated and volatile, indicating persistent fiscal strain.”
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The NESG warned that the divergence between a declining DBI and a rising debt-to-GDP ratio highlights deeper structural weaknesses in Nigeria’s economy. These include weak tax efficiency, poor revenue mobilisation, rising recurrent expenditure, exchange rate volatility, subsidy-related pressures, and inflation-driven spending demands.
It further noted that rising debt servicing obligations continue to crowd out critical public spending, limiting government capacity to invest in infrastructure, education, healthcare, and social protection.
Nigeria’s debt profile has increasingly come under scrutiny as interest payments consume a growing share of government revenue, raising concerns about fiscal flexibility and long-term growth prospects.
The group stressed that without urgent and sustained reforms to broaden the revenue base and plug fiscal leakages, Nigeria risks remaining trapped in a cycle of borrowing to survive.
Meanwhile, data from the Debt Management Office (DMO) showed that Nigeria’s total public debt rose to N159.28 trillion as of December 31, 2025. The report also indicated that while the overall debt stock increased, the structure remained broadly stable, with a slight shift toward domestic borrowing.
DMO further disclosed that total debt servicing costs climbed to about N16 trillion in 2025, driven by higher domestic interest payments and ongoing external obligations.
The NESG cautioned that continued reliance on debt without strong revenue growth could heighten exposure to exchange rate shocks, inflationary pressures, and further constrain fiscal space.
It urged policymakers to prioritise structural reforms that strengthen revenue generation, improve spending efficiency, and reduce dependence on borrowing, warning that Nigeria’s current fiscal trajectory remains fragile despite surface-level improvements.
