Nigeria’s Debt To Stabilise At 50% Of GDP, Signals Economic Progress, Says Moody’s.
In a promising development for Nigeria’s economy, global credit rating agency Moody’s has forecasted that the country’s public debt will stabilise at approximately 50% of its Gross Domestic Product (GDP) by 2026, with fiscal deficits expected to decline in 2026 and 2027. This projection, highlighted in recent posts on X, reflects growing confidence in Nigeria’s ongoing economic reforms and fiscal management under President Bola Tinubu’s administration. However, the agency cautioned that interest payments are projected to consume 35% of government revenue, underscoring the need for sustained fiscal discipline.
According to Moody’s, Nigeria’s debt-to-GDP ratio, which stood at 50.7% in October 2024, is expected to decrease marginally to 49.6% by the end of 2025, marking a significant step towards fiscal sustainability. The International Monetary Fund (IMF) corroborates this outlook, noting in its 2024 Fiscal Monitor Report that Nigeria’s debt-to-GDP ratio is projected to decline further to 48.5% in 2026 and 48.2% in 2027, despite a slight uptick in 2028 and 2029. This downward trend is attributed to improved revenue generation and fiscal reforms aimed at reducing reliance on borrowing.
The stabilisation of Nigeria’s debt-to-GDP ratio comes amidst a challenging economic landscape, with the country grappling with a depreciating naira and high inflation, which averaged 24.5% in 2023 and is projected to rise to 31.6% in 2024 before moderating to 20.7% in 2025. Despite these pressures, the African Development Bank projects Nigeria’s economic growth to increase to 3.2% in 2024 and 3.4% in 2025, driven by higher oil production, improved security, and stronger consumer demand. The commissioning of the Dangote refinery is also expected to reduce energy costs, further bolstering economic prospects.
Moody’s report highlights the government’s efforts to address fiscal vulnerabilities, including liberalisation of the foreign exchange market, removal of fuel subsidies, and improved external financing. These reforms have contributed to a projected current account surplus of 3.0% of GDP in 2024, expected to rise to 3.6% in 2025, driven by increased oil exports. Fitch Ratings recently upgraded Nigeria’s Long-Term Foreign-Currency Issuer Default Rating to ‘B’ with a stable outlook, citing sustained reform momentum as a key factor.
However, challenges remain. Moody’s noted that interest payments on Nigeria’s debt are expected to account for 35% of government revenue, a significant burden on public finances. The IMF has also flagged Nigeria’s low revenue-to-GDP ratio, which stood at 13.5% in 2024, as a critical issue, with debt servicing consuming a large portion of revenues. Analysts have warned that without continued fiscal reforms and economic diversification, Nigeria’s debt obligations, including an average of $1.33 billion in annual Eurobond maturities over the next decade, could strain the economy.
Commenting on the development, economic analyst Adeola Ogunleye stated, “The projected stabilisation of Nigeria’s debt-to-GDP ratio is a testament to the government’s commitment to fiscal prudence. However, the high debt service-to-revenue ratio remains a concern. Strengthening revenue mobilisation and diversifying the economy away from oil dependency will be crucial to sustaining this progress.”
Despite the cautious optimism, Moody’s warned that external risks, such as a potential slump in oil prices, could undermine Nigeria’s fiscal stability, given its reliance on oil exports. The agency urged the government to prioritise transparency in debt management and implement targeted social safety nets to mitigate the impact of inflation and economic reforms on vulnerable populations.
As Nigeria navigates its economic challenges, the Moody’s forecast offers a hopeful outlook, signalling that the country is on a path to greater fiscal stability. With continued reforms and strategic investments, Africa’s largest economy could further solidify its position as a leading economic powerhouse on the continent.
