Last week, the Debt Management Office (DMO) released the approved Nigeria’s Medium-Term Debt Management Strategy (MTDS) for the 2024–2027 fiscal period, following the conclusion of the previous 2020–2023 strategy cycle. The policy paper serves as a strategic blueprint for managing Nigeria’s public debt over the 2024–2027 period. Its primary objective is to establish a structured framework that guides the Federal Government’s (FG) financing decisions and borrowing activities in the short to medium term. 

This framework is essential for ensuring that debt is mobilised in a cost-effective, risk-conscious, and sustainable manner.  A retrospective analysis of the Medium-Term Debt Management Strategy (MTDS) 2020–2023 reveals that the FG successfully met most of the strategic targets outlined in the plan. 

One of the key performance indicators outlined in Nigeria’s MTDS 2020–2023 was the debt-to-GDP ratio, with a target ceiling of 40%. However, the actual outcome for FY 2023 came in significantly lower at 31%, based on the rebased GDP figures. This compares with a pre-rebased debt-to-GDP ratio of 42.3%, highlighting the substantial impact of the GDP rebasing exercise.

• A notable deviation from the strategy was the debt composition mix. The FG has set a target ratio of 70% domestic debt to 30% external debt.
• The actual outcome of a domestic-to-external debt mix of a 61%:39% ratio as of end-December 2023 represents a significant deviation from the targeted 70:30 mix.
• This significant shift in Nigeria’s debt composition was primarily driven by the decision to float the naira in June 2023. The move led to a sharp depreciation of the currency, which in turn inflated the naira value of Nigeria’s dollar-denominated debt.
• As Nigeria transitions into the MTDS 2024–2027 cycle, the FG has set a new debt-to-GDP ceiling of 60%. This marks a notable upward revision from the previous 40% target under the 2020–2023 strategy and is closer to the IMF’s indicative threshold of 70% for emerging markets.
• Based on the rebased FY 2024 GDP figures, Nigeria’s total public debt stock as of Q1 ‘2025 translates to a debt-to-GDP ratio of approximately 41%.
• This suggests that the country is currently well below the new ceiling, providing fiscal space for additional borrowing over the medium term without breaching sustainability thresholds.

• With respect to debt composition, the FG has set a revised target for the domestic-to-external debt composition at 55:45. This marks a strategic shift from the current debt mix of 53% domestic and 47% external as of end-March 2025.
• The rebalancing of Nigeria’s debt portfolio under the MTDS 2024–2027 represents a deliberate shift aimed at mitigating risks from naira volatility and rising global interest rates associated with external borrowings.

• Looking ahead, the higher debt ceiling of 60% offers greater flexibility to meet Nigeria’s financing needs through additional borrowing.
• That said, maintaining debt service obligations within the limits of sustainable revenue generation is essential to ensure fiscal sustainability and avoid undue pressure on public finances.