The Central Bank of Nigeria (CBN) projects that the country’s public debt will reach 34.68 per cent of Gross Domestic Product by the end of 2026, a modest rise from 33.98 per cent at end-June 2025. The bank says exchange rate stability and fiscal adjustments should keep the debt trajectory on a sustainable path despite anticipated new borrowings.
Nigeria public debt outlook shifts from valuation shocks to fundamentals
The CBN’s 2026 Macroeconomic Outlook explains that much of the rapid debt growth seen between 2023 and 2025 resulted from exchange rate revaluation effects. Sharp naira depreciation during that period inflated the domestic value of foreign-currency denominated liabilities. The apex bank now expects those valuation pressures to ease in 2026 as the exchange rate stabilises, reducing one-off increases to the debt stock.
With valuation losses set to narrow, the report says debt dynamics will increasingly reflect traditional fiscal factors such as the primary balance. The bank points to the Tax Act of 2025 and projected improvements in revenue mobilisation as central to this shift. Stronger domestic revenues, combined with real economic growth, should lessen reliance on exchange rate-driven debt accumulation.
The CBN also highlights that the modest upward move in the public debt ratio largely reflects anticipated discretionary borrowings. Nonetheless, it judges the overall outlook sustainable, on the basis that exchange rate effects—the principal driver of recent volatility—will play a much smaller role in 2026.
Policy implications are straightforward. If authorities maintain exchange rate stability and continue implementing tax and spending reforms, Nigeria could see improved debt-service capacity and lower borrowing costs. That would boost investor confidence in Nigeria’s medium-term fiscal position and reduce the likelihood that debt servicing crowds out critical public spending.
The bank’s assessment is reinforced by an independent view from the World Bank. Its October 2025 Nigeria Development Update forecasts that public debt will fall below 40 per cent of GDP for the first time in over a decade. The World Bank also expects economic growth to rise from 4.2 per cent in 2025 to 4.4 per cent by 2027, reflecting the gradual impact of reforms on the broader economy.
Despite the constructive outlook, risks remain. Continued discretionary borrowing could push the debt ratio higher than projected if not matched by revenue gains. External shocks, a reversal in capital flows, or renewed currency pressure would amplify debt servicing costs, particularly for foreign-currency obligations. Effective implementation of the Tax Act 2025 and credible fiscal consolidation will therefore be crucial.
Looking ahead, the key test for policymakers will be converting projections into sustained outcomes. Maintaining exchange rate stability, strengthening tax administration and safeguarding public investment will determine whether Nigeria can anchor debt on a genuinely sustainable path while supporting inclusive growth.
Key Takeaways:
- Nigeria public debt is projected at 34.68% of GDP by end-2026, up slightly from 33.98% at end-June 2025.
- Improved exchange rate stability should reduce valuation-driven debt increases, shifting growth drivers to the primary balance and tax reforms.
- Tax Act 2025 and stronger economic growth are expected to bolster revenue mobilisation and lower borrowing costs.
- World Bank projections align, forecasting debt below 40% of GDP and modest growth gains through 2027.
