Nigeria’s debt burden intensified in 2024 as the country allocated a staggering 4.1% of its Gross Domestic Product (GDP) to debt servicing, according to the latest Country Focus Report released by the African Development Bank (AfDB). This figure represents a notable increase from 3.7% recorded in 2023 and reflects mounting fiscal pressure triggered by escalating borrowing costs, persistent budget deficits, and a depreciating naira.
The report indicates that Nigeria’s rising debt servicing cost is being driven by higher interest payments on both domestic and external borrowings. A total of $3.3 billion in new debt was accumulated by the Federal Government in 2024, including $2.2 billion raised through Eurobond issuances and the remainder from multilateral lenders.
More concerning is the spike in the country’s debt-to-revenue ratio, which rose from 76.8% in 2023 to 77.5% in 2024. This means over three-quarters of government revenue is now dedicated solely to repaying debt, leaving little fiscal space for capital investment or critical social spending.
“Debt service obligations now account for a significant portion of Nigeria’s public finances, restricting fiscal flexibility and the government’s ability to meet development goals,” the AfDB warned.
In the same period, Nigeria’s public debt surged to 52.3% of GDP, up from 41.5% in 2023. This sharp rise was attributed to growing financing needs, the weakening local currency, and elevated interest rates.
Despite efforts to improve revenue through fiscal reforms—including the controversial removal of fuel subsidies and the unification of exchange rates—the results are yet to keep pace with Nigeria’s expenditure needs. The country’s tax-to-GDP ratio remains one of the lowest in sub-Saharan Africa at 5.2%. A major reason for this, the report noted, is the dominance of the informal sector, which contributes approximately 68% to national output and employs over 90% of the labour force.
The AfDB recommended urgent structural reforms to broaden Nigeria’s tax base and improve tax compliance, including digital systems and strengthened institutional frameworks. Though non-tax revenues, especially oil earnings, saw marginal improvement following full fuel deregulation, a substantial development financing gap persists.
Nigeria’s annual development financing needs are now estimated at $47.6 billion, with a projected shortfall of $31.5 billion. Critical sectors like infrastructure, education, and healthcare continue to suffer from chronic underfunding. In 2024, public spending on education stood at just 7.9% and health at 5.3%—figures far below international benchmarks.
Government expenditure as a share of GDP was 15.5% in 2024, trailing the regional average of 21.4%. Meanwhile, the fiscal deficit moderated slightly, falling from 4.0% of GDP in 2023 to 3.9% in 2024. However, experts argue this marginal improvement is insufficient to address Nigeria’s deepening fiscal challenges.
Economic growth remained modest at 3.4% in 2024, bolstered by the services sector and a slight uptick in oil output. However, the AfDB projects a slowdown, with GDP growth expected to dip to 3.2% in 2025 and further to 3.1% in 2026, citing global uncertainties such as oil price volatility and trade tensions.
To reverse this unsustainable trend, the AfDB urged Nigerian policymakers to sustain and deepen economic reforms. It recommended increased public investment in infrastructure, human capital, and innovation, alongside measures to attract private capital through alternative financing models.
In conclusion, unless Nigeria takes bold and sustained steps to curb its borrowing appetite, boost domestic revenue, and prioritize productive spending, its debt profile may pose a significant risk to long-term development and macroeconomic stability.