Ripplesmetrics: Trends in Nigerian debt services to the GDP ratio to the administration

Nigerian debt service obligations increased at speeds that exceeded economic growth, with data showing the state projected to spend a record of 15.1 percent of Gross Domestic Product (GDP) on debt services in 2025.

Analysis of the World Bank numbers revealed that climbing was steep and sustainable in the ratio of debt service to GDP over the past 15 years, from only 0.9 percent in 2009 to 10.2 percent in 2024. Debt services to greater ratios and principles, which have been activated by a status in a country.

This long-term trend underlines how the administration is successive in facing an increase in debt pressure, but also how the scale and speed of growth in debt service costs has been sharply accelerated in recent years.

Yar’Adua Years and Jonathan Year

Between 2009 and 2015, under the administration of the late President Musa Yar’adua and President Goodluck Jonathan, the ratio of debt services to Nigerian GDP remains relatively low and stable. Yar’Adua’s brief tenure maintains numbers below 1 percent, starting from 0.9 percent in 2009 and dropped to 0.5 percent in 2011.

The Jonathan government maintains the same level, with a floating ratio of around 0.5 percent for most of his time in the office, ending at 0.7 percent in 2015. Growth during this period is simple, with a combined annual growth rate (CAGR) of only 6.5 percent, which reflects controlled loans and relatively healthy oil income that supports the budget in a way that is moving the debate.

Administration of Buhari

At the beginning of President Muhammadu Buhari, which began in 2015, the ratio of debt services to GDP reached 0.7 percent. In 2017, he moved up to 0.8 percent, but the increase was immediately accelerated. In 2019, the ratio reached 2.4 percent, and in 2021 it had risen to 4.8 percent. Although there was a slight decline to 4.3 percent in 2022, the figure jumped to 7.3 percent at the end of the term of Buhari’s term of 2023. During the eight years in power, the ratio grew in a surprising CAGR by 29.1 percent.

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This sharp increase was driven by heavy loans to cover the ongoing budget deficit, the economic fall of global oil price shocks, slow GDP growth, and nirai depreciation, which made serving foreign-denominated debts significantly more expensive.

Tinubu Administration

Since the Ball President Ahmed Tinubu served in 2023, the upward track continues with alarming speed. In just one year, this ratio jumped from 7.3 percent to 10.2 percent in 2024, and estimates showed it would reach 15.1 percent in 2025. This represented CAGR projected by 27.6 percent in the early years of his government.

If the forecast is valid, Nigeria will devote more than ₦ 15 of each ₦ 100 goods and services produced for debt service only – before accounting for recurring expenses or capital projects. This will mark the biggest part of GDP that is committed to debt obligations in the history of modern Nigeria, increasing serious concerns about the government’s fiscal capacity to invest in growth sectors.

Acceleration in the debt service to the GDP ratio shows a greater incompatibility between Nigerian economic output and its debt obligations. While loans have been used to fund budget gaps, oil production volatility, low non-miny income, and exchange rate instability have damaged the country’s ability to maintain a controlled ratio. Naira’s depreciation has sharply increased the cost of external loan services, while higher domestic interest rates have encouraged local debt service costs.

During the entire period from 2009 to 2025 projected, the ratio of Nigerian debt services to GDP will grow in a total cagr of 17.8 percent.

Without corrective steps, Nigeria is at risk of locking themselves into a cycle where more loans are needed only to fulfill the existing debt obligations, leave fewer space for economic expansion and social investment.

By: James Odunayo