“Nigeria’s Debt-to-GDP Hits 52%: Can Rebasing and Reforms Prevent a Fiscal Crisis?”

Nigeria’s public debt has become one of the most discussed topics in recent months, as new data shows the country’s debt-to-GDP ratio is rising sharply. As of December 31, 2024, Nigeria’s debt-to-GDP ratio stood at 52.25%, well above the Federal Government’s self-imposed ceiling of 40%. Although a recent rebasing of the country’s Gross Domestic Product (GDP) has lowered the ratio to about 39.4% as of March 31, 2025, concerns remain over Nigeria’s rising borrowing levels and the sustainability of its fiscal policies.

The debt-to-GDP ratio is a key metric used to determine how much a country owes in comparison to the size of its economy. While Nigeria’s rebased GDP has created a more favorable picture, many analysts argue that this does not change the reality that debt levels are rising and debt servicing is consuming a significant portion of national revenue. The conversation now focuses on whether Nigeria can strike a balance between borrowing for development and ensuring long-term fiscal stability.

Debt Rising Despite GDP Rebasing

GDP rebasing is a statistical adjustment that updates the way a country calculates its economic size. Nigeria last conducted a major rebasing in 2013, which saw it emerge as Africa’s largest economy at the time. The latest rebasing has again increased the size of Nigeria’s GDP, factoring in growth in new industries such as fintech, the creative economy, and other informal sectors.

While this statistical adjustment lowered the debt-to-GDP ratio from over 52% to 39.4%, it did not reduce the actual amount Nigeria owes. The country’s total public debt, including borrowings from both domestic and international lenders, remains high and is expected to continue rising. According to the Debt Management Office (DMO), Nigeria’s medium-term strategy anticipates that the debt-to-GDP ratio could climb to 60% by 2027.

The DMO argues that this projection is not unusual, pointing out that many countries carry higher debt ratios. However, experts caution that Nigeria’s relatively low government revenue base makes high debt levels riskier, as the government may struggle to meet repayment obligations without sacrificing spending on development and infrastructure.

Why Nigeria’s Debt Is Growing

There are several reasons for Nigeria’s rising debt levels. Over the past decade, the government has relied heavily on borrowings to fund its budgets, particularly as oil revenue—Nigeria’s primary source of foreign exchange—has remained volatile.

Other key drivers include:

1. Borrowings to Cover Budget Deficits: Persistent budget deficits have forced the government to rely on both domestic and international loans to meet expenditure needs.
2. Promissory Notes and CBN Advances: The inclusion of ₦30 trillion in Ways and Means Advances from the Central Bank of Nigeria (CBN) has added significantly to the total debt profile.
3. Exchange Rate Pressures: Depreciation of the naira has increased the cost of servicing foreign-denominated debt, further straining public finances.
4. Infrastructure Financing Needs: With an urgent need for investment in roads, power, and education, Nigeria has increasingly turned to lenders such as the World Bank, IMF, and commercial creditors to bridge infrastructure gaps.

Economic Implications

While debt itself is not inherently bad, its impact on Nigeria’s economy is raising concern. A rising debt-to-GDP ratio can reduce investor confidence, increase borrowing costs, and put pressure on the government’s ability to fund essential services. Currently, Nigeria spends a large portion of its revenue servicing debt, leaving less for critical areas such as education, healthcare, and job creation.

Moreover, the expected rise in the debt ratio to 60% by 2027 could place Nigeria among the most indebted countries in Africa relative to the size of its economy. This trajectory has sparked calls for fiscal reforms and improved revenue generation. Economists have urged the government to expand its tax base, tackle oil theft, and diversify its revenue sources to avoid unsustainable borrowing.

Government’s Position

The Federal Government maintains that borrowing is necessary to finance critical development projects and stimulate economic growth. Officials argue that Nigeria’s debt-to-GDP ratio remains manageable when compared to other emerging economies, many of which have debt levels exceeding 70%. They also highlight that Nigeria’s debt strategy is carefully planned under the Medium-Term Debt Management Strategy (MTDS) for 2024–2027, which seeks to keep borrowing within safe limits while increasing infrastructure investment.

The government has also promised to improve debt transparency, strengthen revenue collection through tax reforms, and reduce reliance on loans for recurrent expenditure. Analysts, however, stress that Nigeria’s revenue-to-GDP ratio—currently among the lowest in the world—poses a bigger threat to debt sustainability than the debt-to-GDP figure itself.

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The Way Forward

For Nigeria to achieve long-term economic stability, it must strike a balance between borrowing for growth and ensuring fiscal sustainability. Experts recommend diversifying the economy, reducing oil dependence, and improving revenue collection through reforms. In addition, curbing wastage, enhancing public financial management, and investing in sectors with high growth potential could help the country reduce reliance on debt.

While GDP rebasing has temporarily improved Nigeria’s fiscal metrics, the underlying challenge remains the country’s heavy reliance on borrowing to fund government operations. Without bold policy actions, Nigeria risks entering a debt trap where a large share of revenue is dedicated to servicing loans rather than building infrastructure or creating jobs.