NESG Warns Nigeria Remains in High-Risk Debt Zone Despite Fiscal Improvements

The Nigerian Economic Summit Group has warned that Nigeria remains exposed to significant debt vulnerabilities despite recent improvements in some fiscal indicators, citing weak revenue generation, structural imbalances, and continued dependence on borrowing to finance government expenditure.

The policy advocacy group disclosed this in its latest public finance assessment titled “Debt Pressure Persists Beneath Surface Stability: DBI Signals Elevated Fiscal Strain in 2025,” where it cautioned that the country’s debt profile remains fragile despite a temporary moderation in debt servicing pressures.

According to the report, Nigeria’s Debt Burden Index declined to 70.9 points in 2024 from 83.6 points recorded in 2023. However, the group stressed that the decline does not represent a fundamental improvement in the country’s fiscal condition.

“In 2024, the Debt Burden Index (DBI) declined to 70.9 points from a peak of 83.6 points in 2023. At face value, this suggests an easing of debt stress. However, this improvement was largely driven by a partial moderation in debt service pressures, rather than a fundamental strengthening of fiscal capacity,” the NESG stated.

The group explained that Nigeria’s debt challenges remain deeply rooted in persistent fiscal deficits, poor revenue mobilisation, rising recurrent expenditure, and broader structural weaknesses within the economy.

It further noted that although the Debt Burden Index recorded a temporary decline, the country’s debt-to-GDP ratio rose sharply to 40.6 per cent in 2024, reflecting continued reliance on borrowing to support public spending obligations.

According to the report, the divergence between the declining Debt Burden Index and the rising debt-to-GDP ratio highlights underlying fiscal vulnerabilities that remain unresolved.

The NESG projected that debt pressures could intensify further in 2025, with the Debt Burden Index expected to rise to 78.4 points in the first quarter and peak at 79.6 points in the second quarter before moderating slightly to 76.2 points in the third quarter.

The report estimated that the index would rebound again to 79.2 points by the fourth quarter of 2025, indicating sustained fiscal strain throughout the year.

“The 2025 DBI trajectory reinforces concerns. Quarterly estimates show that the DBI remains elevated and volatile, rising to 78.4 points in Q1 and peaking at 79.6 points in Q2, before moderating to 76.2 points in Q3 and closing the year at an estimated 79.2 points in Q4,” the report stated.

The group warned that Nigeria’s fiscal position continues to face pressure from weak tax efficiency, inflation-related spending demands, exchange rate volatility, and the lingering impact of subsidy reforms.

According to the NESG, rising debt servicing obligations are also limiting the government’s ability to allocate resources toward critical infrastructure development and social investments.

It added that weak revenue mobilisation remains one of the most significant threats to long-term fiscal sustainability, as government revenues continue to lag behind rising expenditure commitments.

The report further noted that continued dependence on borrowing could increase Nigeria’s vulnerability to inflation shocks and exchange rate instability, especially amid external economic uncertainties.

The NESG stressed that without comprehensive reforms aimed at improving domestic revenue generation and reducing fiscal leakages, the country’s debt burden could become more difficult to manage in the coming years.

The group also warned that improvements in headline debt indicators may create a misleading impression of fiscal stability while deeper structural imbalances persist beneath the surface.

“Overall, the 2024–2025 transition does not yet reflect a decisive shift toward debt sustainability. Rather, it signals a system making only marginal adjustments, with improvements in headline ratios masking persistent structural imbalances,” the report stated.

Nigeria’s debt profile has remained under scrutiny in recent years as rising borrowing costs and debt servicing obligations continue to consume a substantial share of government revenues.

Economic analysts have repeatedly raised concerns over the sustainability of the country’s fiscal framework, particularly as authorities continue to rely on both domestic and external borrowing to bridge budget deficits and fund development programmes.

The latest warning from the NESG adds to growing concerns among economic stakeholders regarding the need for stronger fiscal reforms, improved revenue administration, and more disciplined public expenditure management to prevent further deterioration in the country’s debt position.