Nigeria’s Debt-to-Gross domestic product Ratio Set to Drop with Economic restructure.

Nigeria’s rebase of its economy could significantly improve fiscal sustainability by reducing its debt-to-GDP ratio from 56.23% in June 2024 to around 40%. This change, alongside lower tax-to-GDP ratios and improved per capita income, is expected to ease Nigeria’s rising debt burden, despite the country’s low government revenue of just 14% of GDP. The country’s debt stock, which surged by N8.02 trillion to N142 trillion in Q3 2024, is primarily driven by the naira’s depreciation and increased external obligations. Although Nigeria’s debt levels remain within IMF standards, the rapid expansion of both domestic and external debt amid constrained revenue growth and rising government expenditures poses significant risks. With debt service surpassing 100% of federal government revenue in 2023 and continuing in 2024, experts suggest that reducing borrowing, increasing revenue, and lowering recurrent expenditures are crucial to managing Nigeria’s fiscal challenges and ensuring long-term stability.