Right now, it is difficult to say. While Nigeria’s Debt-GDP ratio suggests she is in a healthy debt position, her Debt Servicing ratio suggests otherwise.
There is no single accepted measure of debt sustainability but the two most common metrics are the Debt-GDP ratio – which compares the size of a country’s debt to its economy – and Debt Servicing-Government Revenue ratio – which compares how much a country pays in debt financing with how much it earns in a given period.
At the end of 2016, Nigeria’s Debt-GDP ratio was 17.11%, below the current Debt Management Threshold of 19.39%, and also below international peer-average of 56.00%.
In the same period, Nigeria’s Debt Servicing-Government revenue was 46.96%, significantly above the DMO threshold of 28.00%.
So, Nigeria’s debt looks sustainable when you compare it to GDP, but much less so when we account for actual government revenues. This divergence stems from the Federal Government’s historically weak revenue collection and reliance on oil, which has meant that government revenues have not matched the growth in Nigeria’s economy in the last decade.
In 2006, Nigeria was involved in the Paris Debt Club forgiveness where the country had most of its foreign debt forgiven by international creditors. Now, public debt is on the rise again, driven by aggressive borrowing by the present administration and currency devaluation that increased the size of foreign debt. Many international bodies such as the World Bank have raised concern over the speed and scale of Nigeria’s borrowing, often highlighting its weak Debt Servicing Ratio.
Debt Management Office: Debt Sustainability Analysis
Debt Management Office: 2016 Public Debt Profile
Development Finance International: Debt Sustainability
Centre for Global Development: Nigerian Debt Relief
The Cable: 66% of Nigeria's Revenues goes to Debt Servicing