Debt servicing has continued to consume a significant portion of government revenue, leaving little room for capital investments that are essential for infrastructure and long-term economic growth.
BusinessDay analysis of government data shows that the federal government spent N8.93 trillion on debt servicing between January and September 2024—representing 61 percent of the total N14.55 trillion revenue generated during the period. This figure not only surpassed the projected N6.03 trillion earmarked for debt servicing during that time frame but also exceeded the N5.85 trillion allocated to capital expenditure.
The trend reflects a broader pattern in recent years. In 2021, debt servicing consumed 71.8 percent of total government revenue. While this fell to 48.5 percent in 2022, it rose again to 64.5 percent in 2023, highlighting a persistent imbalance between Nigeria’s earnings and expenditure on debt repayment.
Analysts warn that this trajectory could have far-reaching consequences for Nigeria’s development ambitions. Uche Uwaleke, professor of finance and capital markets at Nasarawa State University, said the high cost of debt repayment continues to undermine the country’s economic potential.
“Nigeria’s debt service ratio is inimical to economic development, chiefly because what could have been used to build infrastructure and invest in human capital is used to service debt,” Uwaleke told BusinessDay. “The opportunity cost for the country is high. To ensure debt sustainability, the government should tie future borrowings to self-liquidating projects—projects that can generate revenue to repay the loans.”
Nigeria’s debt service payments, according to the Central bank of Nigeria (CBN), stood at N3 trillion ($2.01 billion exchanged at N1,494/$) in the first four months (January to April) of 2025, up from N2 trillion ($1.34 billion exchanged at N1,494/$) in the same period of 2024.
Read also: Debt servicing gulped 61% of FG’s revenue from Jan-Sept 2024
Major concern
Muda Yusuf, chief executive of the Centre for the Promotion of Private Enterprise (CPPE), described the situation as a major concern for macroeconomic stability. According to him, the rising share of debt servicing in total revenue is constraining the country’s fiscal space and increasing its reliance on borrowing.
“It is something to worry about,” Yusuf said. “When you have this kind of huge ratio of debt service to revenue, it means that fiscal space will be constrained. The risk is that you may even continue to borrow more, leading to a vicious cycle of debt. That’s not good for the economy.”
Yusuf stressed the importance of increasing government revenue while ensuring more efficient spending. “We need to take advantage of the reported improvements in revenue to reduce our debt exposure. We also need to periodically review our expenditure profile to avoid a mismatch between income and spending,” he added.
Paul Alaje, a senior economist at SPM Professionals, also raised red flags over Nigeria’s debt trajectory. Speaking on Arise News recently, Alaje said the country’s debt sustainability indicators are deteriorating. He noted that Nigeria’s debt-to-GDP ratio now stands at 39.4 percent—dangerously close to the statutory limit of 40 percent.
“We’re clearly on the brink,” Alaje warned. “We used to spend 98 percent of our revenue just servicing debt. Now it’s about 70 to 74 percent—still more than double the accepted benchmark of 33 percent.”
Alaje expressed concern that the huge borrowing has not translated into broad-based economic development. “If the debt was truly impacting the economy, it would reflect in real growth and infrastructure—not just in Abuja and Lagos but across the country,” he said.
He warned that if the current fiscal pattern continues, Nigeria’s total public debt could hit N200 trillion by 2027, with debt servicing possibly consuming over 90 percent of revenue. He also pointed to the effect of high domestic interest rates, which have made government securities more attractive to banks than lending to the private sector.
Alaje also noted the severe depreciation of the naira in the past two years, from below N500 to over N1,500 to the dollar—a 300 percent decline—noting that Nigeria cannot print its way out of debt like the United States or the European Union.
He called for an urgent reordering of fiscal priorities. “We need to flip the ratio. Spend 60 percent on capital projects and 40 percent on recurrent expenditure—not the other way around. Too much money goes into running government. It’s excessive.”
According to Alaje, Nigeria still has untapped revenue opportunities that do not involve overburdening the poor. However, he expressed doubt that Nigeria could reach its target of becoming a $1 trillion economy by 2030 without consistent double-digit GDP growth.
“Unless we rebase the economy multiple times or massively boost productivity, we won’t get there,” he said.
