Nigeria approves 2024–2027 debt strategy to tackle rising borrowing risks
The federal government has approved Nigeria’s Medium-Term Debt Management Strategy (MTDS) for 2024–2027, a fiscal blueprint designed to ensure debt sustainability, strengthen macroeconomic stability, and deepen the domestic securities market.
The approval was announced Saturday in a statement by the Debt Management Office (DMO) following the endorsement of the policy framework by the Federal Executive Council (FEC).
Developed with technical support from the World Bank and International Monetary Fund (IMF), the MTDS is a globally recognized framework for managing public debt, balancing borrowing needs with cost and risk considerations.
Under the new framework, the Federal Government has set ambitious fiscal benchmarks: Debt-to-GDP ratio projected to rise to a ceiling of 60 per cent by 2027, from 52.25 per cent in 2024; Interest payments-to-GDP capped at 4.5 per cent, compared to 3.75 per cent in 2024; Sovereign guarantees-to-GDP limited to 5 per cent, from 2.09 per cent currently.
Also, domestic-to-external debt mix adjusted from 48:52 to 55:45, to reduce exposure to foreign exchange risks, while refinancing risk capped at 15 per cent of debt maturing within one year, debt maturity period extended, with an average minimum of 10 years and forex debt exposure cut to 45 per cent of total debt, down from 51.75 per cent.
The DMO explained that the MTDS was developed after extensive consultations with the Central Bank of Nigeria (CBN), the Federal Ministry of Finance, and other stakeholders, ensuring that the plan aligns with international standards.
Analysts say the MTDS offers a credible roadmap to reduce refinancing risk and forex exposure, but warn that fiscal reforms such as improving tax collection, diversifying revenue, and cutting wasteful spending must complement the plan.
While many praised the approval of the MTDS, they stressed that successful implementation will depend on Nigeria’s ability to expand revenues and curb fiscal indiscipline.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), described the MTDS as a “welcome framework” but warned that Nigeria’s biggest problem remains the cost of debt servicing.
“Debt-to-GDP looks manageable, but when you compare debt servicing to government revenue — over 70 per cent by some estimates — the picture is alarming. Without significant revenue reforms, the ceilings set in the MTDS will be very difficult to maintain.”
Professor Uche Uwaleke, Nigeria’s first Professor of Capital Market, emphasized the importance of shifting borrowing toward the domestic market.
“The 55:45 ratio is a good move because it limits foreign exchange risk. However, the government must ensure this does not crowd out private sector borrowing. Deepening the domestic bond market is key.”
Relationship Manager at FSDH Merchant Bank, Ayodele Akinwunmi, said the MTDS sends the right signals to global investors.
“This strategy provides assurance to credit rating agencies and lenders that Nigeria is committed to prudent debt management. The challenge is discipline — ensuring that borrowing is tied strictly to productive investments rather than recurrent expenditure.”
Nigeria’s public debt has risen sharply in recent years, fueled by persistent fiscal deficits, declining oil revenues, and foreign exchange instability.
Although the debt-to-GDP ratio remains moderate compared to many African peers, the country’s debt service-to-revenue ratio is one of the highest globally, raising sustainability concerns.
Blueprint
