Nigeria debt crisis deepens as analysts warn rising election spending could threaten fiscal stability and debt sustainability

Fresh concerns have emerged over Nigeria’s fiscal stability after economic analysts warned that rising pre-election spending ahead of the 2026 and 2027 political cycle could derail recent debt management efforts and worsen the country’s mounting financial pressures.

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The warning was contained in the latest Coronation Economic Note on the Q4 2025 Debt Report, which revealed that Nigeria’s total public debt has climbed to a record N159.28tn despite ongoing fiscal consolidation measures.

According to the report, the country’s apparent improvement in debt-to-GDP ratio masks deeper structural weaknesses surrounding revenue generation and debt servicing capacity.

Analysts described Nigeria’s fiscal consolidation drive as “fragile in execution,” warning that politically driven expenditure during the election cycle represents a major risk to economic stability.

The report stated that Nigeria’s debt-service-to-revenue ratio reached an estimated 113 per cent in early 2025, meaning the Federal Government is now spending more on debt repayments than it generates in total revenue.

Experts warned that the development reflects a dangerous borrowing cycle in which new loans are increasingly being used to service existing obligations rather than finance productive investment.

“A government spending more on debt servicing than it earns in total revenue is not servicing debt from cash flow, it is rolling obligations forward,” the report stated.

The Nigeria debt crisis has intensified despite the country maintaining a relatively moderate debt-to-GDP ratio compared to global benchmarks.

The International Monetary Fund projects Nigeria’s debt-to-GDP ratio could decline to 32.3 per cent by 2026, below the commonly referenced 55 per cent distress threshold.

However, Coronation analysts argued that the ratio alone does not accurately capture the country’s financial vulnerability because Nigeria’s revenue base remains significantly weaker than those of comparable African economies.

The report noted that Nigeria’s tax-to-GDP ratio currently stands between 9 and 10 per cent, far below levels recorded in South Africa, Kenya and Ghana.

The concerns come shortly after the National Assembly approved a fresh $6bn external borrowing plan, further signalling continued reliance on debt financing.

Analysts insisted that sustainable recovery would depend less on borrowing controls and more on aggressive revenue mobilisation capable of expanding government income.

The report stressed that revenue generation, rather than debt restructuring alone, would determine whether Nigeria can genuinely improve its long-term fiscal position.

Economic experts also called for stricter enforcement of the Fiscal Responsibility Act to ensure borrowed funds are channelled into infrastructure and productive capital projects instead of recurrent expenditure.

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Without meaningful structural reforms, the report warned that heightened political spending during the next election cycle could push public finances to a critical breaking point.