Nume Ekeghe

Nigeria’s decision to revise its Medium-Term Debt Management Strategy (MTDS) for 2024–2027 has stirred mixed reactions among analysts, who acknowledge the need to adapt borrowing plans to prevailing realities but warn that the higher debt ceiling could expose the economy to greater vulnerabilities if revenue mobilisation remains weak.

The framework, unveiled by the Debt Management Office (DMO) and approved by the Federal Executive Council last week, resets Nigeria’s borrowing parameters in line with the MTEF 2025–2027 and the 2025 Appropriation Act. It seeks to balance cost and risk within sustainable thresholds after earlier assumptions in the 2024–2026 MTEF were overtaken by sharp currency fluctuations.

A key feature of the new strategy is the upward adjustment of the public debt ceiling. The debt-to-GDP ratio, which breached the previous 40 per cent cap after climbing to 52.3 per cent in 2024, is now capped at 60 per cent. The interest payment-to-GDP ratio was also raised to 4.5 per cent from 3.7 per cent, highlighting the rising cost of debt servicing.

While the shift provides the government with wider fiscal space, some analysts argue it reflects a growing dependence on borrowing rather than a clear path to fiscal sustainability. With GDP currently estimated at $243 billion, the expanded limit could encourage further debt accumulation at a time when revenues continue to underperform due to oil price volatility and sub-2.0mbpd output.

Commenting, analysts at Afrinvest stated: “While periodic recalibration of debt strategy is consistent with global best practice, the shift raises important considerations. The higher debt ceiling appears less about sustainability and more about creating room for increased borrowing. With GDP currently estimated at $243billion and the government targeting a jump to $1trillion by 2027, lifting the debt ceiling from 40 per cent to 60 per cent effectively creates wider fiscal space for additional borrowing, particularly at a time when revenues continue to trail expectations on the back of oil price volatility and sub-2.0mbpd output.
 
“Nevertheless, the reweighting towards domestic borrowings is a prudent step that could shield the sovereign balance sheet from further FX-induced shocks. Going forward, we believe the government should place greater emphasis on reducing its debt burden and significantly improving revenue mobilisation, rather than simply creating more room to borrow. Without stronger revenue performance, higher ceilings risk compounding fiscal vulnerabilities instead of supporting long-term growth.”
 

The post Analysts Cautious on Nigeria’s Higher Debt Ceiling, Say Revenue Gaps Remain Bigger Risk appeared first on THISDAYLIVE.