Nigeria’s Debt Burden to Decline to 35% GDP in 2026 -Moody’s
Nigeria’s debt burden is projected to decline in 2026 to around 35% of the gross domestic product (GDP) in 2026, according to details obtained from Moody’s periodic ratings review.
Nigeria’s total public debt reached ₦153.29 trillion, equivalent to $103.94 billion as of September 30, 2025, according to the Debt Management Office (DMO). This marked a 0.59% increase from ₦152.40 trillion in June 2025, according to the statistics office.
In its non-ratings review note, Moody’s said Nigeria’s ratings reflect fiscal pressures arising from very limited revenue-generation capacity, despite measures to improve tax collections, and weak debt affordability, notwithstanding a moderate debt burden.
Ratings analysts explained that the country’s very weak institutional and governance framework further constrains credit strength.
“These challenges are balanced by the country’s large and diversified economy, underpinned by strong domestic demand potential, and more robust external buffers built over the past two years following the overhaul of foreign-exchange management”.
The global ratings agency acknowledged that the Nigerian economy remained strong in 2025, with GDP growth near 4%, in line with 2024 at 4.1%, despite subdued oil production.
Ratings analysts cited that Nigeria’s oil output has increased to an average of around 1.64 million barrels per day (mbpd) in 2025, up from nearly 1.55 mbpd in 2024, but still well below the medium-term target of 2.1 mbpd.
Inflation eased to 15.1% in January 2026, down from near 27.6% in January 2025.
“In late September, the Central Bank of Nigeria cut its policy rate by 50 basis points to 27%, signaling the start of a gradual easing cycle, before delivering a further 50-basis-point cut in February, bringing the policy rate to 26.5%.
“The naira has remained broadly stable following the 2023 foreign exchange reforms, and has appreciated by about 6% in the first month of 2026, while the current account continues to show a strong surplus, which we estimate at 5.4% of GDP in 2025.
“Supported by a significant trade surplus, resilient oil earnings, strong capital inflows, and steady remittances, official gross foreign reserves have increased to $46.3 billion as of January 2026, up by $6.6 billion from the same period in 2025.
“We expect the current account surplus to decline to around 3% of GDP in 2026, under our assumption of oil prices averaging $60 per barrel.”
“The federal government returned to the eurobond market in November, issuing $2.35 billion, but near-term financing still relies heavily on costly domestic borrowing”.
Moody’s analysts project Nigeria’s debt burden to decline to around 35% of GDP in 2026 from 36.2% estimated in 2025, despite a marginally wider fiscal deficit of around 2.8% of GDP.
The review acknowledged that Nigeria’s tax reforms have been in effect since January 2026 and should gradually strengthen revenue mobilisation over the medium term.
Nigeria’s economic strength is rated “ba2”, reflecting its sizeable, somewhat diversified economy, set against modest economic growth relative to population growth and low income levels that constrain loss-absorption capacity.
The oil sector contributes modestly to GDP, but its role in foreign-exchange generation remains significant; current subdued oil production therefore continues to weigh on the economy.
“We assess Nigeria’s institutions and governance at “caa2”. Persistent challenges in policy formulation and implementation, coupled with weak law enforcement – highlighted by low, albeit improving tax compliance – underscore governance weaknesses”.
Moody’s said the country ranks near the bottom of various international governance indicators.
“We assess Nigeria’s fiscal strength at “b3”, reflecting a moderate government debt burden that remains vulnerable to naira depreciation, alongside very low revenue generation and high interest payments, which exert considerable pressure on the budget”.
Moody’s said Nigeria’s susceptibility to event risk is scored at “ba”, driven equally by political risk, government liquidity risk, banking sector risk and external vulnerability risk.
The stable outlook reflects the view that external and fiscal improvements will slow but not reverse entirely. Rating analysts expect broad policy continuity, with the Central Bank of Nigeria maintaining its current foreign-exchange regime amid a positive balance of payments, albeit weaker due to lower oil prices.
Ratings analysts said government efforts to enhance non-oil revenue will continue, though fiscal outcomes and reform initiatives will be shaped by the electoral context. Inflation will continue to decelerate, enabling additional monetary policy easing.
Upward pressure on the rating would stem from sustained improvements in revenue generation capacity and access to lower-cost financing, resulting in stronger debt affordability, while preserving macroeconomic stability.
The review affirmed that measures that enhance the quality of Nigeria’s institutional framework and governance would also strengthen its credit profile.
Moody’s said such developments would likely occur alongside continued structural reforms and macroeconomic stability, including a flexible foreign exchange regime without significant currency depreciation and robust reserve levels, signalling a more effective policy framework.
“Downward pressure on the rating could arise if debt metrics and affordability weaken significantly, for example, due to policy reversals driven by political changes or social demands, or external shocks such as a sharp decline in oil prices.
A resurgence of inflationary pressures, if not effectively managed by monetary authorities and resulting in tighter financing conditions, would also weigh on the credit profile. In addition, a deterioration in the security environment that causes significant economic disruption would be negative for the rating, the review note stated. Kaduna Assembly Passes N152.4bn Appropriation Bill for 23 LGAs
