DMO Projects Single-digit Inflation By 2027

The Debt Management Office (DMO) has projected that Nigeria’s inflation rate will decline steadily to below 10 per cent by 2027.

This comes as the country unveils its new debt strategy, which aims to curb risks and ensure fiscal sustainability over the medium term.

The projection, contained in the newly approved Medium-Term Debt Management Strategy (MTDS) 2024–2027, signals cautious optimism that ongoing fiscal and monetary reforms will tame the country’s surging prices.

According to the DMO, inflation, which averaged 21.4 per cent in 2024, is expected to fall to 15.75 per cent in 2025, drop to 14.21 per cent in 2026, and ease into single digits by the end of 2027.

The outlook also foresees the economy expanding by 4.6 per cent in 2025, 4.4 per cent in 2026, and accelerating to 5.5 per cent in 2027, driven primarily by investments in infrastructure, agriculture, and social services.

On the foreign exchange front, the naira is projected to stabilise at ₦1,400/$ from 2026, after closing 2024 at ₦1,535/$.

Amid these forecasts, the Federal Executive Council (FEC) has approved the updated debt management plan, anchored on Strategy Two (S2).

The chosen strategy prioritises increased borrowing from multilateral and bilateral sources to reduce reliance on Eurobond issuance while also deepening the domestic capital market with more medium- to long-term instruments.

Under the new framework, Nigeria has set a debt-to-GDP ceiling of 60 per cent, well below the 70 per cent threshold prescribed by the IMF and ECOWAS.

Debt service will be capped at 4.5 per cent of GDP, while exposure to foreign currency debt will be restricted to a maximum of 45 per cent of total public debt.

Data from the DMO show that Nigeria’s public debt-to-GDP ratio surged to 52.25 per cent by end-2024, up from 19 per cent in 2019, largely due to new borrowings, exchange rate depreciation, and the securitisation of over ₦30 trillion in Ways and Means Advances from the Central Bank of Nigeria.

The DMO noted that while Strategy Two presents the best trade-off between cost and risk, it still leaves the country vulnerable to foreign exchange risks, given the relatively high share of external debt.

To cushion these risks, the agency disclosed plans to explore innovative instruments such as ESG-compliant securities, Sukuk, and domestic US dollar bonds, alongside potential debt-for-climate and debt-for-health swaps.

The debt office stressed that the MTDS would be reviewed annually to accommodate emerging shocks and market realities, particularly with interest rates on domestic securities projected to remain elevated—above 30 per cent for Treasury Bills and over 22 per cent for benchmark bonds in the medium term.