Nigeria’s fiscal reform efforts may be at serious risk as economists warn that rising political spending ahead of the 2026–2027 election cycle could reverse recent gains in debt management and deepen the country’s financial challenges.
This 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 an unprecedented N159.28tn.
Although Nigeria’s debt-to-GDP ratio remains within what analysts describe as a manageable range, the report stressed that the country’s real challenge lies in its weak revenue generation capacity.
According to the report, Nigeria’s fiscal consolidation drive remains “fragile in execution,” with analysts identifying pre-election expenditure as one of the biggest threats to economic stability in the coming years.
A major concern highlighted in the report is Nigeria’s debt-service-to-revenue ratio, which was estimated at 113 per cent in early 2025. This means the Federal Government is spending more on servicing debts than it earns in total revenue.
The analysts warned that such a trend reflects a dangerous borrowing cycle where the government relies on fresh loans to repay existing obligations rather than settling debts through actual revenue inflows.
Despite adding about N109tn to its debt profile over the past three years, the report noted that the government has continued to depend heavily on borrowing to stay financially afloat.
While the International Monetary Fund projects that Nigeria’s debt-to-GDP ratio could decline to 32.3 per cent by 2026 — significantly below the 55 per cent debt distress threshold — Coronation analysts argued that the figure does not accurately reflect the country’s fiscal reality.
They explained that Nigeria’s low revenue generation remains the biggest obstacle to sustainable debt management.
The report pointed out that Nigeria’s tax-to-GDP ratio currently stands at about 9–10 per cent, far below countries such as South Africa at 24 per cent, Kenya at 16 per cent, and Ghana at 13 per cent.
The warning comes shortly after the National Assembly approved a fresh $6bn external borrowing request, further signalling the government’s continued reliance on loans to finance expenditure.
Economic analysts insist that improving revenue generation, rather than accumulating more debt, remains the only sustainable path to restoring fiscal stability.
The report also called for stronger structural reforms, including stricter enforcement of the Fiscal Responsibility Act to ensure borrowed funds are channelled into capital projects instead of recurrent spending.
Experts cautioned that without urgent reforms, increased spending during the election season could place Nigeria’s already strained finances under even greater pressure.