Nigeria spent 4.1 per cent of its Gross Domestic Product on debt servicing in 2024, according to the latest Country Focus Report by the African Development Bank.
The figure represents an increase from 3.7 per cent recorded in 2023 and reflects the rising cost of borrowing amid tightening global financial conditions and high domestic interest rates.
According to the report, the increase in debt service obligations was driven by higher interest payments on government securities and fresh borrowings to finance the budget deficit.
It added that the increased expenditure was largely driven by debt servicing costs, which consumed a larger share of public finances despite recent fiscal reforms. Public debt rose sharply to 52.3 per cent of GDP in 2024, up from 41.5 per cent in 2023, largely due to increased financing needs and a weaker naira.
The Federal Government raised a total of $3.3bn in new debt in 2024, including $2.2bn from Eurobond issuance and the remainder from multilateral lenders.
The report further disclosed that the debt servicing-to-federal government revenue ratio increased from 76.8 per cent in 2023 to 77.5 per cent in 2024, indicating that over three-quarters of government revenue went into paying debt obligations.
“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 report said.
The AfDB warned that this trend could limit the government’s ability to invest in critical infrastructure and social development. Debt service obligations gulp a significant portion of Nigeria’s fiscal resources, the report stated, noting that limited fiscal space is constraining the capacity to meet pressing development priorities.
Despite a moderate decline in the fiscal deficit—from 4.0 per cent of GDP in 2023 to 3.9 per cent in 2024—pressures on public finance remain elevated.
The government’s reform programme, including the removal of fuel subsidies and unification of the exchange rate, has led to improved revenue mobilisation, but the gains are yet to match the scale of spending requirements.
Nigeria’s tax-to-GDP ratio remains among the lowest in the region at 5.2 per cent, underscoring persistent weaknesses in domestic revenue mobilisation. The report identified the large informal economy, which accounts for 68 per cent of national output, and informal employment exceeding 90 per cent, as major barriers to expanding the tax net.
GIK/APA