FG Approves Medium-Term Debt Strategy, Sets 60% Debt-to-GDP Ceiling by 2027
The Federal Government has endorsed a new Medium-Term Debt Management Strategy (MTDS) for the period 2024 to 2027, with a target to keep Nigeria’s public debt within a maximum ceiling of 60 percent of Gross Domestic Product (GDP) by 2027.
The decision, announced by the Debt Management Office (DMO) after its approval by the Federal Executive Council, represents the government’s latest effort to balance its growing financing needs with the imperative of debt sustainability.
Nigeria’s debt profile has continued to expand in recent years, reaching 52.25 percent of GDP as of December 2024.
The new strategy projects that the figure may rise but will be capped at 60 percent within the medium term.
The government stressed that this threshold remains within international best practices while reflecting the realities of funding critical infrastructure and economic recovery programmes.
Beyond the debt-to-GDP ratio, the strategy also imposes controls on other fiscal indicators. Interest payments are to remain below 4.5 percent of GDP by 2027, compared to 3.75 percent in 2024, while the level of sovereign guarantees will not exceed 5 percent of GDP, up from the current 2.09 percent.
According to the DMO, these ceilings are designed to safeguard against excessive borrowing costs and contingent liabilities.
A major highlight of the MTDS is a deliberate shift in Nigeria’s debt composition in favour of local borrowing. The current 48:52 ratio of domestic to external debt will be adjusted to 55:45, thereby reducing exposure to exchange rate fluctuations and global market shocks.
Officials say the move will also help deepen the domestic financial market and create more investment opportunities for local investors.
To arrive at the strategy, the government modelled four borrowing scenarios and subjected them to potential stress conditions, including exchange rate depreciation and interest rate shocks. Out of these, Strategy Two was selected as the most resilient.
It promises lower debt servicing costs—averaging 3.93 percent of GDP—alongside reduced refinancing risks and smoother repayment schedules.
The DMO explained that the MTDS is a fiscal planning framework developed with guidance from the World Bank and International Monetary Fund (IMF). Its objective is to ensure that borrowing decisions are consistent with the government’s development agenda, while maintaining financial discipline and credibility in the eyes of creditors and investors.
Analysts, however, warn that successful implementation will depend largely on government’s ability to expand its revenue base and curtail recurrent expenditure.
With debt service already consuming more than 60 percent of federal revenues in 2024, concerns remain about the sustainability of the plan if revenue performance does not improve significantly.
The DMO has assured that the strategy will be reviewed periodically to respond to changing economic conditions such as oil price volatility, inflation, or currency depreciation.
By setting clear targets and borrowing limits, the Federal Government has provided what it calls a “roadmap for prudent debt management” over the next three years. The strategy underscores Nigeria’s dual challenge of financing growth while safeguarding long-term fiscal stability.
