Despite improving fiscal indicators, Nigeria is still exposed to substantial debt risks, according to the Nigerian Economic Summit Group (NESG).
Weak revenue generation, enduring structural imbalances, and the ongoing reliance on borrowing to fund budget deficits and maintain public spending were all mentioned by the group.
This was revealed by NESG in its most recent evaluation of Nigeria’s public finance outlook, “Debt Pressure Persists Beneath Surface Stability: DBI Signals Elevated Fiscal Strain in 2025.”
Nigeria’s overall fiscal situation is still precarious and susceptible to ongoing debt pressures, despite some debt metrics improving between 2024 and 2025, according to the NESG.
According to the NESG, Nigeria’s Debt Burden Index (DBI), a more comprehensive indicator of debt stress than traditional debt ratios, decreased from 83.6 points in 2023 to 70.9 points in 2024.
The group did, however, issue a warning that the decrease should not be seen as proof that the nation’s financial situation has significantly improved.
The DBI was predicted by NESG to increase to 78.4 points in Q1 2025 and 79.6 points in Q2 2025.
Before rising to 79.2 points in Q4 2025, the index was estimated at 76.2 points in Q3.
The NESG claims that rather than greater fiscal capacity, better revenue mobilisation, or structural reforms, the decline was primarily caused by a brief easing of debt-servicing pressures.
In general, there hasn’t been a clear shift towards debt sustainability in the 2024–2025 transition. Instead, it indicates that the system is only making minor changes, with improvements in headline ratios concealing ongoing structural imbalances, according to the report.
The group further stated that Nigeria’s ongoing reliance on borrowing to fund ongoing fiscal deficits is reflected in the country’s growing debt-to-GDP ratio.
The NESG observed that the nation’s fiscal position is still being weakened by structural flaws like inadequate revenue mobilisation, inefficient taxation, growing recurrent expenditures, exchange-rate pressures, subsidy reforms, and inflation-related spending demands.
The group emphasised that deeper fiscal vulnerabilities within the economy are highlighted by the divergence between a rising debt-to-GDP ratio and a declining DBI.
Concerns are strengthened by the DBI trajectory for 2025. The DBI is still high and erratic, according to quarterly estimates, which increased to 78.4 points in Q1 and peaked at 79.6 points in Q2 before declining to 76.2 points in Q3 and ending the year at an estimated 79.2 points in Q4, according to the report.
The group added that the nation’s debt load may continue to be a threat to long-term economic growth unless major reforms are put in place to improve revenue generation and lessen fiscal leakages.
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