NESG Warns Nigeria Remains in High-Risk Debt Zone Despite Fiscal Stability Gains

Nigeria Still Faces Elevated Debt Risks, NESG Cautions

The Nigerian Economic Summit Group (NESG) has warned that Nigeria remains exposed to significant debt vulnerabilities despite recent improvements in fiscal indicators and broader macroeconomic stabilisation efforts.

The private sector-led policy think tank disclosed this in its latest fiscal assessment titled “Debt Pressure Persists Beneath Surface Stability: DBI Signals Elevated Fiscal Strain in 2025.” According to the report, although certain debt metrics improved between 2024 and 2025, Nigeria’s fiscal position remains fragile due to weak revenue mobilisation, structural imbalances, and continued dependence on borrowing to finance public expenditure.

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The warning comes amid ongoing economic reforms by the Federal Government aimed at stabilising inflation, improving foreign exchange liquidity, and restoring investor confidence following major fiscal and monetary policy adjustments implemented since 2023.

NESG Says Debt Pressure Remains Elevated

According to the NESG report, Nigeria’s Debt Burden Index (DBI) a broader measure used to assess fiscal strain beyond traditional debt-to-GDP ratios declined to 70.9 points in 2024 from 83.6 points recorded in 2023. However, the organisation cautioned that the reduction should not be interpreted as evidence of strong fiscal recovery.

The group stated that underlying debt pressures remain substantial due to low government revenue generation relative to expenditure obligations.

“Nigeria’s broader fiscal condition remains fragile and susceptible to persistent debt pressures,” the report noted.

NESG further explained that debt servicing obligations continue to consume a significant portion of government revenue, limiting fiscal space for capital expenditure and long-term development investments.

Analysts note that while Nigeria’s debt-to-GDP ratio remains lower than many advanced economies, the country’s debt-service-to-revenue ratio remains one of the most concerning indicators due to weak revenue mobilisation capacity.

Fiscal Stabilisation Yet to Translate Into Strong Structural Recovery

The report acknowledged that recent reforms have contributed to improvements in some macroeconomic indicators, including foreign exchange stability, inflation moderation, and external reserve performance.

Nigeria’s economy has shown signs of cautious recovery in 2026, supported by exchange rate reforms, subsidy removal policies, and improving investor sentiment. According to economic projections cited by multiple analysts, GDP growth is expected to remain between 4.0% and 4.5% over the medium term, driven largely by services, telecommunications, finance, and trade sectors.

However, NESG warned that macroeconomic stability alone may not sufficiently address deeper fiscal vulnerabilities without stronger productivity growth and revenue expansion.

The organisation stressed that Nigeria remains heavily dependent on debt financing to sustain public spending and budget implementation, especially amid fluctuating oil revenues and persistent infrastructure financing gaps.

Weak Revenue Generation Continues to Constrain Fiscal Space

One of the central concerns highlighted by the NESG is Nigeria’s historically weak revenue performance relative to the size of the economy and public spending obligations.

Despite being Africa’s largest economy by population, Nigeria continues to generate relatively low tax revenue as a percentage of GDP compared with peer economies. Experts have repeatedly identified revenue underperformance as a major factor driving recurrent borrowing and widening fiscal deficits.

The report noted that rising debt service obligations continue to constrain the government’s ability to invest adequately in infrastructure, healthcare, education, and social development programmes.

According to economic analysts, Nigeria’s 2026 federal budget allocates more than ₦15 trillion to debt servicing, representing a substantial share of projected revenue.

The pressure on public finances has intensified amid elevated infrastructure needs, exchange rate volatility, energy transition challenges, and rising social spending demands.

NESG Calls for Structural Economic Reforms

The policy group emphasised the need for deeper structural reforms aimed at expanding productivity, improving domestic revenue generation, and reducing dependence on debt-driven growth.

According to NESG, sustainable fiscal recovery will require stronger industrial productivity, improved tax administration, export diversification, and increased investment in infrastructure capable of stimulating long-term economic growth.

The organisation also warned against policy reversals that could undermine recent reform gains, particularly regarding subsidy reforms and fiscal discipline.

Recent NESG policy papers have similarly cautioned that Nigeria’s economic outlook remains vulnerable to oil production shortfalls, external shocks, and election-related spending pressures ahead of the 2027 political cycle.

Analysts argue that while exchange rate reforms and fuel subsidy removal have improved macroeconomic signals, the benefits have yet to fully translate into broad-based household relief due to inflationary pressures and weak purchasing power.

Debt Sustainability Remains Key Investor Concern

The NESG report is likely to reinforce investor focus on Nigeria’s debt sustainability outlook at a time when the country continues to seek both domestic and international financing for infrastructure and economic development programmes.

Credit rating agencies and development finance institutions have recently acknowledged improvements in Nigeria’s macroeconomic management while continuing to flag concerns around fiscal sustainability and revenue weakness.

Analysts note that debt sustainability concerns could influence sovereign borrowing costs, investor confidence, and the pace of foreign direct investment inflows if structural imbalances remain unresolved.

The report also highlights broader concerns about balancing fiscal consolidation with the need for economic expansion and poverty reduction in a country facing high unemployment, inflation, and infrastructure deficits.

Government Continues Economic Reform Push

The Federal Government has maintained that ongoing reforms are designed to reposition the economy toward sustainable long-term growth.

Recent policy measures have included foreign exchange liberalisation, tax reform initiatives, efforts to improve oil production, and strategies aimed at increasing non-oil revenue generation.

The administration has also intensified discussions around expanding the tax base, improving customs revenue, digitising tax systems, and strengthening public financial management processes.

Economic analysts say the effectiveness of these reforms will largely depend on sustained implementation, institutional coordination, and the government’s ability to improve productivity across key sectors including energy, manufacturing, agriculture, and infrastructure.

The NESG’s latest assessment underscores the fragile nature of Nigeria’s fiscal recovery despite signs of macroeconomic stabilisation. While recent reforms have improved some economic indicators, the country continues to face elevated debt risks driven by weak revenue generation, persistent borrowing dependence, and structural economic imbalances.

For policymakers, investors, and economic stakeholders, the report highlights the urgency of implementing deeper structural reforms capable of strengthening fiscal sustainability, expanding productive capacity, and reducing Nigeria’s long-term exposure to debt-related vulnerabilities.

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