Nigeria’s Rising Debt, Revenue Shortfalls Deepen Fiscal Worries – Independent Newspaper Nigeria

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LAGOS – Nigeria’s fiscal health is undergoing pres­sure as the Federal Government’s rising debt obligations are compounded by per­sistent revenue shortfalls, raising fresh concerns about the country’s economic direction and debt sustainability.

Latest figures from the Debt Manage­ment Office (DMO) show that Nigeria’s total public debt climbed to ₦121.67 trillion at the end of March 2025—an in­crease of more than ₦24 trillion in just 15 months.

The increase reflects new borrowings, exchange rate losses due to naira depre­ciation, and interest accruals.

The naira, now trading above N1,550 to the US dollar, has significantly inflated the cost of servicing Nigeria’s external debt, which now exceeds $42 billion. More than 60 percent of the total debt is owed domestically.

 Economist and Managing Di­rector and Chief Executive Offi­cer of Economic Associates, Dr. Ayo Teriba, said, “The worrying part is that a huge chunk of our revenue goes into paying interest. If debt servicing consumes over 90 percent of government reve­nue, then you are not borrowing to grow—you’re borrowing to stay afloat.”

Despite relatively strong glob­al oil prices, government revenue continues to fall short of projec­tions.

In the first quarter of 2025, the Federal Government’s retained revenue was reported to be 24 percent below budget, with both oil and non-oil sources under-per­forming.

Analysts blame several fac­tors, including oil production disruptions caused by theft and sabotage, sluggish tax adminis­tration reforms, and continued revenue leakages in key sectors.

The Nigerian National Petro­leum Company Limited (NNP­CL), a key source of fiscal inflows, has not made significant remit­tances to the Federation Account so far this year.

“We keep missing revenue targets because the structural issues have not been properly ad­dressed,” said Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. “We need a faster pace of reform and stricter enforcement of accountability.”

Debt Servicing Costs Soar

The International Monetary Fund (IMF) has consistently flagged Nigeria’s debt ser­vice-to-revenue ratio as one of the highest globally. The ratio reached 92 percent in 2023 and may worsen this year if current trends continue.

Experts warn that such a sce­nario limits the government’s ability to invest in growth-en­hancing sectors like infrastruc­ture, education, and healthcare.

“Borrowing is not inherently bad, but it must be accompa­nied by strong revenue growth and prudent spending,” said Oyebanji Oyelaran-Oyeyinka, a senior adviser at the African Development Bank. “Right now, Nigeria has limited fiscal room to manoeuvre.”

Reforms Are Underway, But Slow

The President Bola Tinubu administration has rolled out a range of fiscal reforms in re­sponse to mounting economic pressures. These include the re­moval of fuel subsidies in 2023, liberalisation of the foreign ex­change market, and the launch of a Medium-Term Revenue Strate­gy aimed at raising the tax-to-GDP ratio to at least 18 percent by 2030.

In 2024, the Federal Inland Rev­enue Service (FIRS) began digitis­ing tax processes and expanding the tax base to capture informal sector operators. The government is also reviewing tax waivers and incentives to plug leakages.

“We’re working to fix the foundation,” said Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms. “The challenges are deep-rooted, but progress is being made.”

Still, revenue outcomes re­main underwhelming, even as the cost of governance remains high.

Investors Cautious

Investor sentiment has be­come increasingly cautious. Yields on Nigerian government bonds have spiked in recent months, reflecting both mone­tary tightening and increased fiscal risk.

In its latest country report, Fitch Ratings maintained Nige­ria’s B-rating but cited rising debt service costs and weak revenue mobilisation as key risks. Port­folio investors are also wary of currency volatility, demanding higher premiums to hold nai­ra-denominated assets.

Multilateral lenders have urged the government to take bolder steps to raise revenues and rationalise spending before granting further support.

States Also Under Pressure

Sub-national governments are also feeling the strain. According to BudgIT, at least 17 states spent more than 50 percent of their revenues servicing debts in 2024, raising questions about fiscal pru­dence at the state level.

Talks are ongoing between the Federal Government and the Central Bank of Nigeria (CBN) on restructuring some state-level obligations. However, economists warn that repeated bailouts with­out clear accountability may en­courage fiscal indiscipline.

“States must take more responsibility for generating their revenues,” said Dr. Zainab Usman, Director of the Africa Programme at the Carnegie En­dowment for International Peace. “There’s too much reliance on Abuja for survival.”

Tough Road Ahead

Looking ahead, analysts say Nigeria must strike a difficult balance between funding critical development needs and manag­ing an increasingly fragile debt profile.

Some have called for an in­dependent audit of public debt to determine which borrowings were productive and which may be renegotiated. Others have sug­gested leveraging underutilised public assets to raise revenue through concessions and pub­lic-private partnerships.

“The key to restoring fiscal stability is rebuilding trust—both from investors and from the Nige­rian public,” said Teriba. “That can only happen if we show disci­pline, improve transparency, and get better value for every naira spent.”

For now, the average Nigerian continues to feel the impact of tough economic reforms, rising living costs, and weak public ser­vices—all symptoms of a system under significant fiscal strain.