Debt Service May Swallow 90% of FG Revenue, Analyst Warns

Financial analysts have expressed fresh concerns over Nigeria’s mounting debt burden, warning that the federal government’s debt servicing obligations could consume more than 90 per cent of its revenue if the current pace of domestic borrowing continues.

The concern followed the release of the Debt Management Office’s (DMO) provisional Federal Government of Nigeria (FGN) Bond Issuance Calendar for the third quarter of 2026, which revealed plans to raise about N4 trillion through bond auctions between July and September to finance the budget deficit and refinance maturing obligations.

The chief executive of The CFG Advisory, Tilewa Adebajo, said the latest borrowing plan reinforces fears that Nigeria’s debt trajectory is becoming increasingly difficult to sustain, especially as government continues to depend heavily on the domestic debt market while also considering another Eurobond issuance.

“The CFG Advisory is concerned about the rising debt profile and the sustainability of the Nigerian government’s domestic borrowing, choice of foreign debt instruments and yet another plan to approach the Eurobond market,” Adebajo said.

According to him, the DMO only released its first bond issuance calendar for 2026 in the third quarter after already borrowing close to N10 trillion in the first half of the year, almost matching the total amount raised throughout 2025.

“The DMO finally issued its first Bond Issuance Calendar for this year, for Q3 2026, after borrowing close to N10 trillion in the first six months of this year, nearly equivalent to its total borrowing of last year. The last time DMO issued a calendar was seven months ago,” he stated.

He disclosed that the DMO plans to raise about N1.7 trillion in July, N1.6 trillion in August and another N1.6 trillion in September, pushing total domestic borrowing to about N15 trillion by the end of the third quarter.

“Going by its latest data and plans, DMO has in the first half of this year surpassed its entire fundraising of last year. It plans to raise N1.7 trillion in July, N1.6 trillion in August and N1.6 trillion in September by which time domestic debt raised this year will be about N15 trillion and, at the current run rate, hit N20 trillion by year end 2026,” he said.

Adebajo warned that the federal government’s N16 trillion debt service provision may no longer be sufficient, noting that rising borrowing costs could push the country’s debt service to revenue ratio above 90 per cent. “It is evident that the government debt service budget of N16 trillion can no longer hold as we expect debt service to revenue ratios to cross the 90 per cent mark,” he said.

He further observed that debt servicing has now overtaken the combined budgetary allocations to defence, education, health and infrastructure, raising concerns about the government’s fiscal space and its ability to fund critical sectors of the economy.