Nigeria’s debt-service-to-revenue ratio surged to 162% in early 2024, significantly straining government finances as more revenue is diverted to debt repayment rather than infrastructure and social spending. This increase follows foreign exchange reforms and the removal of fuel subsidies, intended to boost revenue but have yet to alleviate debt pressures. The country’s debt servicing costs soared by 69% year-on-year to reach N6 trillion, consuming half of the government’s total expenditure, illustrating the heavy financial burden on Nigeria.
The depreciation of the naira has further exacerbated the nation’s debt situation, with the total debt stock rising by N12.6 trillion between March and June 2024, bringing the public debt to N134.3 trillion. The falling naira has increased the cost of foreign debt, and analysts predict that if this trend continues, Nigeria’s debt could reach N185 trillion by 2026. This scenario raises concerns among analysts who warn that Nigeria is at serious risk of a debt crisis, which could destabilize the economy through currency devaluation, reduced investor confidence, and social unrest.
In response, the government is aiming to double its revenue by overhauling tax laws, which could increase revenue from 9% to 18% of GDP in the next few years. These measures are anticipated to relieve some fiscal pressure, though analysts expect rising debt costs to continue in the near term due to inflation and the currency’s weakened value. The government’s ambitious fiscal reforms reflect efforts to avoid an impending debt crisis and stabilize Nigeria’s volatile economic landscape.
