The Nigerian Economic Summit Group (NESG) has cautioned that Nigeria remains trapped in a high-risk debt environment despite recent improvements in some fiscal indicators, warning that weak revenue generation, rising debt dependence, and deep structural imbalances continue to threaten the country’s long-term fiscal sustainability.
In its latest report titled “Debt Pressure Persists Beneath Surface Stability: DBI Signals Elevated Fiscal Strain in 2025,” the policy think tank argued that Nigeria’s recent fiscal gains may create a misleading impression of stability while underlying vulnerabilities continue to worsen beneath the surface.
According to the report, Nigeria’s Debt Burden Index (DBI), a broader measure used to assess fiscal stress beyond conventional debt-to-GDP ratios, declined to 70.9 points in 2024 from 83.6 points recorded in 2023. However, the NESG stressed that the decline should not be interpreted as evidence of a genuine improvement in debt sustainability.
The group explained that the reduction in the DBI was driven largely by temporary relief in debt servicing pressures rather than meaningful structural reforms or stronger revenue mobilisation efforts. It warned that Nigeria’s fiscal system remains highly vulnerable due to its narrow revenue base, heavy reliance on borrowing, and rising recurrent expenditure obligations.
Despite the improvement in the Debt Burden Index, Nigeria’s debt-to-GDP ratio rose sharply to 40.6% in 2024, reflecting the government’s continued dependence on debt financing to fund budget deficits and maintain public sector operations.
The NESG noted that the contrast between a falling DBI and a rising debt-to-GDP ratio exposes deeper structural weaknesses within the economy, including poor tax efficiency, weak revenue mobilisation, inflation-driven spending pressures, exchange rate volatility, and lingering subsidy-related fiscal burdens.
The report also projected renewed fiscal pressure in 2025, forecasting that the Debt Burden Index would rise again to 78.4 points in the first quarter, increase further to 79.6 points in the second quarter, ease slightly to 76.2 points in the third quarter, and close the year at 79.2 points in the fourth quarter.
According to the NESG, the projected volatility reinforces concerns that Nigeria’s fiscal challenges remain unresolved despite temporary improvements in headline indicators.
The group warned that mounting debt servicing obligations continue to consume an increasingly large share of government revenue, leaving limited fiscal space for critical investments in infrastructure, healthcare, education, and social welfare programs.
Analysts have repeatedly raised concerns over Nigeria’s growing debt profile, particularly as interest payments continue to rise faster than government revenues. The NESG stated that the country risks remaining trapped in a cycle where new borrowing is increasingly used to finance existing obligations and sustain routine government spending rather than productive investments capable of generating long-term economic growth.
The report stressed that without urgent reforms aimed at expanding the revenue base and improving fiscal discipline, Nigeria’s debt vulnerabilities could deepen further in the coming years.
Meanwhile, recent figures released by the Debt Management Office (DMO) showed that Nigeria’s total public debt rose to N159.28 trillion as of December 31, 2025. Although the structure of the debt portfolio remained relatively stable, the DMO noted a slight increase in domestic borrowing within the overall debt mix.
The DMO also disclosed that Nigeria’s debt servicing costs climbed to approximately N16 trillion in 2025, driven by rising domestic interest payments and continued external debt obligations.
The NESG warned that continued dependence on borrowing without corresponding improvements in revenue generation could expose Nigeria to greater exchange rate risks, inflationary pressures, and reduced fiscal flexibility.
To address the growing fiscal strain, the group urged policymakers to prioritize structural economic reforms focused on improving tax collection efficiency, widening the revenue base, reducing fiscal leakages, and enhancing the efficiency of public spending.
According to the NESG, while recent fiscal indicators may suggest modest progress, Nigeria’s broader fiscal outlook remains fragile, and sustainable improvement will require deeper reforms beyond short-term adjustments in debt servicing conditions.
