Nigeria’s debt servicing burden climbed to 4.1% of its Gross Domestic Product in 2024, up from 3.7% the previous year, according to the African Development Bank’s latest Country Focus Report.
The increase signals mounting financial pressure driven by higher borrowing costs amid tightening global markets and elevated domestic interest rates.
The AfDB report highlights that Nigeria’s rising debt obligations stem from increased interest payments on government securities and new borrowings to plug the budget deficit.
Despite recent fiscal reforms aimed at stabilizing public finances, debt servicing consumed a growing share of government revenue, reaching 77.5% in 2024, up from 76.8% in 2023.
This means over three-quarters of federal revenue was funneled into meeting debt obligations, leaving limited room for other critical expenditures.Nigeria’s public debt also surged to 52.3% of GDP in 2024, a sharp rise from 41.5% in 2023, fueled by a weaker naira and heightened financing needs.
To meet these demands, the Federal Government raised $3.3 billion in new debt last year, including $2.2 billion through Eurobond issuance, with the remainder sourced from multilateral lenders.
The report underscores the challenges Nigeria faces in balancing its fiscal obligations with economic growth, as rising debt costs and a depreciating currency continue to strain public finances.
According to the report, “Debt servicing increased to 4.1 per cent of GDP from 3.7 per cent in 2023. The debt servicing-to-federal-government-revenue ratio stood at 76.8 per cent in 2023, rising slightly to 77.5 per cent in 2024.”
The AfDB has cautioned that rising debt service obligations are consuming a large share of Nigeria’s fiscal resources, potentially hindering investments in essential infrastructure and social development. The report noted that limited fiscal space is restricting the government’s ability to address urgent development needs.
Although the fiscal deficit slightly narrowed from 4.0% of GDP in 2023 to 3.9% in 2024, public finance pressures remain high.
Nigeria’s tax-to-GDP ratio remains one of the lowest in the region at 5.2 per cent, reflecting ongoing challenges in domestic revenue mobilisation. The report attributed this to the large informal sector, which makes up 68 per cent of national output, and informal employment levels exceeding 90 per cent—both major obstacles to broadening the tax base.
It stressed the importance of expanding the tax net and enhancing compliance through digital tax systems and stronger institutional capacity. While non-tax revenues—especially oil-related income—improved in 2024 due to full fuel market deregulation, the AfDB warned that Nigeria continues to grapple with a substantial development financing shortfall.
Government spending amounted to 15.5 per cent of GDP in 2024, significantly below the sub-Saharan African average of 21.4 per cent. The report noted that the education and health sectors remained underfunded, receiving only 7.9 per cent and 5.3 per cent of total expenditure, respectively.
