Nigeria’s fiscal consolidation efforts face a “fragile” future as experts warn that the upcoming 2026–2027 election cycle could trigger a massive surge in government spending, potentially undermining recent debt management gains.

According to the latest Coronation Economic Note on the Q4 2025 Debt Report, the nation’s total public debt has hit a record N159.28tn. While the government’s debt-to-GDP ratio appears healthy on paper, the report highlights a “critical paradox” in Nigeria’s ability to actually pay what it owes.

“Nigeria’s fiscal consolidation story is in reality still aspirational, as it is fragile in execution,” the report states, noting that any pre-election spending uptick represents a major risk variable for the 2026–2027 period.

The most alarming finding in the report is the debt-service-to-revenue ratio, which reached an estimated 113 per cent in early 2025. This indicates that the Federal Government is spending more on interest and debt repayments than it generates in total revenue.

“A government spending more on debt servicing than it earns in total revenue is not servicing debt from cash flow, it is rolling obligations forward, creating a self-reinforcing borrowing cycle,” it added.

Despite an N109tn expansion in debt over the last three years, the report suggests that the government is essentially staying afloat by borrowing to pay back previous loans.

The International Monetary Fund projects Nigeria’s debt-to-GDP ratio will decline to 32.3 per cent by 2026, well below the 55 per cent distress threshold. However, Coronation analysts argue that this “headline ratio tells an incomplete story”, as the country’s revenue base remains structurally undersized compared to its African peers.

“Nigeria’s revenue base, not the size of its economy, is the binding constraint on debt sustainability. At about 9–10 per cent of GDP, Nigeria’s tax-to-GDP ratio sits far below South Africa (24 per cent), Kenya (16 per cent), and Ghana (13 per cent).”

With the National Assembly recently approving a new $6bn external borrowing package, the reliance on debt shows no signs of slowing down. Analysts emphasise that the only way out of the cycle is aggressive revenue mobilisation rather than more borrowing.

“Revenue mobilisation, not debt management description, is the variable that will determine whether the sustainability trajectory genuinely improves.”

The report concludes with a call for structural reforms, including the enforcement of the Fiscal Responsibility Act to ensure that borrowing is used for capital investment rather than daily operational expenses. Without these changes, the “spending spike” of an election year could push Nigeria’s finances to a breaking point.