Experts caution that Nigeria’s fiscal consolidation measures face a “fragile” future because the impending 2026–2027 election cycle might lead to a significant spike in government spending, potentially undoing recent improvements in debt management.
The country’s overall public debt has reached a record N159.28 trillion, according to the most recent Coronation Economic Note on the Q4 2025 Debt Report. Although the government’s debt-to-GDP ratio seems sound on paper, the analysis identifies a “critical paradox” in Nigeria’s capacity to make its debt payments.
According to the research, “Nigeria’s fiscal consolidation story is in reality still aspirational, as it is fragile in execution,” and any increase in pre-election spending is a significant risk factor for the years 2026–2027.
The debt-service-to-revenue ratio, which was expected to be 113% in early 2025, is the report’s most concerning result. This shows that the federal government spends more on debt repayment and interest than it makes overall.
It went on to say, “A government that spends more on debt servicing than it makes in total revenue is not servicing debt from cash flow, it is rolling obligations forward, creating a self-reinforcing borrowing cycle.”
According to the research, the government is simply remaining afloat by borrowing money to repay prior loans, despite an increase in debt of N109 trillion over the past three years.
Nigeria’s debt-to-GDP ratio is expected to drop to 32.3% by 2026, much below the 55% crisis threshold, according to IMF projections. Coronation experts contend that this “headline ratio tells an incomplete story” because the nation’s income base is still fundamentally smaller than that of its African counterparts.
“The primary restriction on debt sustainability is Nigeria’s revenue base, not the size of its economy. Nigeria’s tax-to-GDP ratio, at roughly 9–10% of GDP, is significantly lower than that of South Africa (24%), Kenya (16%), and Ghana (13%).
There is little indication that the National Assembly’s recent approval of a new $6 billion foreign borrowing package will slow down the reliance on debt. Analysts stress that vigorous income mobilization, not additional borrowing, is the only way to break the cycle.
The variable that will determine whether the sustainability trajectory truly improves is revenue mobilization, not the description of debt management.”
In order to guarantee that borrowing is utilized for capital investments rather than ongoing operating costs, the report ends with a demand for structural changes, such as the implementation of the Fiscal Responsibility Act. Without these adjustments, Nigeria’s finances might reach a breaking point due to the “spending spike” of an election year.
