Nigeria Approves Medium-Term Debt Management Strategy 2024–2027 to Ensure Fiscal Stability

Nigerian Federal Executive Council Meeting

The Federal Government of Nigeria has approved a new Medium-Term Debt Management Strategy (MTDS) covering 2024–2027, a move aimed at ensuring that the country’s debt profile remains sustainable while promoting fiscal stability and strengthening the domestic capital market.

The strategy, developed with technical guidance from the World Bank and the International Monetary Fund (IMF), received the endorsement of the Federal Executive Council (FEC) and was confirmed in a statement issued by the Debt Management Office (DMO).

According to the DMO, the MTDS is designed to balance the government’s borrowing needs with fiscal responsibility, ensuring that public debt remains manageable while supporting economic growth.

Objectives of the MTDS

The framework sets out clear objectives to guide Nigeria’s debt management over the medium term. The DMO highlighted three main goals:

1. Meeting Financing Needs and Payment Obligations: Ensuring that the government can meet its short- to medium-term financing requirements without compromising debt sustainability.

2. Optimizing Debt Composition: Achieving a balanced debt portfolio that minimizes risks, including currency exposure and refinancing pressures, while promoting stability.

3. Deepening Domestic Capital Markets: Strengthening local financial markets through the introduction of new debt instruments, encouraging investment, and reducing reliance on external borrowing.

“The key objectives of the MTDS are to meet the Government’s financing needs and payment obligations in the short to medium term, taking into consideration the costs and risk trade-offs in the debt portfolio; to achieve optimum composition of the public debt portfolio that ensures debt sustainability; and to further deepen the domestic securities market through the introduction of new products,” the DMO statement read.

Key Benchmarks and Risk Management Measures

The new strategy introduces specific benchmarks to guide borrowing and reduce potential risks associated with debt accumulation. Some of the key measures include:

• Debt-to-GDP Ratio: The government projects an increase from 52.25% in 2024 to a maximum of 60% by 2027, ensuring debt remains within manageable limits.

• Interest Payments-to-GDP: Interest expenses will be capped at 4.5% of GDP, compared with 3.75% in 2024, balancing cost management with financing needs.

• Sovereign Guarantees: Guarantees will not exceed 5% of GDP, up from the current 2.09%, allowing for measured support to public enterprises without undue risk.

• Debt Composition: The debt mix will shift to 55% domestic and 45% external, reducing exposure to foreign exchange volatility and mitigating currency risk.

• Refinancing Risk: Only 15% of debt will mature within a year, helping prevent liquidity pressures.

• Average Maturity: The average debt maturity will be extended to at least 10 years, promoting long-term stability.

• Foreign Currency Debt: FX-denominated debt will be reduced to 45% of total debt, down from 51.75%, minimizing the risk of exchange rate fluctuations affecting repayment obligations.

Collaboration and Technical Guidance

The MTDS was developed through close collaboration among key stakeholders, including the Central Bank of Nigeria (CBN), the Ministry of Finance, and other government agencies. International partners such as the World Bank and IMF provided technical guidance to ensure the strategy aligns with global best practices and strengthens Nigeria’s fiscal credibility.

The DMO emphasized that the new framework would enhance transparency, improve investor confidence, and provide clear signals to lenders and rating agencies about Nigeria’s commitment to responsible debt management.

Benefits for the Nigerian Economy

The implementation of the MTDS is expected to deliver multiple benefits for Nigeria’s economy, including:

• Debt Sustainability: By carefully managing borrowing and extending maturities, the government aims to reduce vulnerability to refinancing shocks and currency volatility.

• Investor Confidence: Clear benchmarks and a well-structured debt portfolio will reassure both local and international investors of Nigeria’s fiscal discipline.

• Domestic Market Development: Introducing new debt instruments and prioritizing domestic borrowing will help deepen Nigeria’s capital markets and create more investment opportunities.

• Fiscal Responsibility: With interest payments capped and sovereign guarantees carefully monitored, the strategy encourages prudent public spending and effective debt servicing.

A Strategic Move for the Medium Term

Experts believe that the MTDS 2024–2027 represents a strategic approach to Nigeria’s debt management, combining risk mitigation, fiscal responsibility, and market development. By focusing on domestic funding, longer maturities, and measured external borrowing, the government aims to navigate economic uncertainties while supporting growth initiatives.

Finance analysts also note that this strategy could help Nigeria maintain favorable credit ratings, reduce borrowing costs, and attract long-term investment in infrastructure and social projects.

The approval of the Medium-Term Debt Management Strategy 2024–2027 marks a significant step in Nigeria’s fiscal planning. By emphasizing sustainability, risk management, and domestic market development, the government is signaling its commitment to prudent debt practices while creating an environment conducive to economic growth.

As the strategy takes effect, investors, policymakers, and international partners will be closely monitoring its implementation, with expectations that Nigeria’s debt profile will remain stable, financing needs will be met efficiently, and the domestic capital market will continue to grow.

With these measures, Nigeria aims to demonstrate that responsible borrowing and fiscal discipline can coexist with efforts to fund development, strengthen economic resilience, and maintain public confidence.