•‘11 million new taxpayers onboarded after NIN-TIN linkage’

Nigeria’s debt burden is increasingly competing with spending on critical social sectors, with interest payments on public debt rivalling or exceeding public health expenditure, the African Development Bank (AfDB) has said.

Nigeria is among 25 African countries in which interest payments on public debt between 2021 and 2023 were at least comparable to public health spending, according to AfDB’s newly released West Africa Economic Outlook 2026.

The report, titled ‘Mobilising West Africa’s Development Financing at Scale in a Fragmented World’, warned that the rising cost of debt service is crowding out public spending required to drive structural transformation and improve living standards across the continent.

For Nigeria, the warning comes against the backdrop of efforts by the Federal Government to stabilise the economy following naira depreciation that triggered significant inflationary pressures in 2023 and 2024.

The AfDB projects West Africa’s economic growth to remain relatively strong at about 4.7 per cent in 2026.

But it said the region’s ability to translate growth into sustained development would depend on its capacity to mobilise domestic and external financing, improve investment efficiency and address fiscal constraints.

The AfDB noted that Nigeria’s post-rebasing disinflation was a major factor behind West Africa’s 4.8 per cent economic growth in 2025, with the country’s inflation rate falling from 33.2 per cent to 23 per cent during the period.

It said the naira, which lost about 70 per cent of its value between the 2023-24 foreign exchange liberalisation and 2024, stabilised through 2025 following deeper foreign exchange market reforms and tighter monetary policy by the Central Bank of Nigeria (CBN).

However, the improvement in price stability has not eliminated the country’s fiscal pressures, it said, putting Nigeria’s debt-service burden at 24.8 per cent of exports in 2025 and highlighting the pressure that debt obligations continue to exert on the economy.

The AfDB also linked high public debt across Africa to weaker productivity, estimating that a one per cent increase in public debt is associated with a 4.9 per cent decline in labour productivity and a 4.6 per cent decline in total factor productivity.

Nigeria’s external debt-to-GDP ratio fell to 36.8 per cent in 2025 from 40.5 per cent in 2024. However, the AfDB said the ratio remained significantly above the 13-m to 21 per cent range recorded between 2017 and 2023, reflecting increased borrowing associated with the country’s reform programme.

The country has also struggled to attract significant foreign direct investment (FDI), with inflows estimated at $1.08 billion in 2024 despite the reform launched in 2023.

The AfDB said the subdued investment inflows highlighted the gap between policy ambition and investor confidence.

Nigeria’s weak revenue mobilisation remains another major constraint on the government’s ability to finance development without relying heavily on borrowing.

The report said Nigeria’s tax-to-GDP ratio rose from 5.2 per cent in 2023 to seven per cent in 2024 but remained the lowest among countries in the region.

The figure also dragged down West Africa’s average tax-to-GDP ratio to 9.9 per cent, which the AfDB said was about 10 percentage points below the 20 per cent convergence benchmark of the West African Economic and Monetary Union (WAEMU).

The Bank, however, acknowledged the impact of Nigeria’s tax digitisation efforts, particularly the National Revenue Service’s TaxPro-Max platform and the linkage of the National Identification Number (NIN) with Tax Identification Numbers (TIN).

According to the report, TaxPro-Max had onboarded more than 11 million taxpayers, helping to expand the country’s tax base.

Beyond revenue mobilisation, the AfDB raised concerns about the efficiency with which Nigeria converts public investment into productive assets.

It put Nigeria’s public investment efficiency score at 0.46, implying that a significant portion of public investment does not translate into productive capital.

The score places Nigeria among the weaker performers in West Africa, alongside Burkina Faso and Guinea, underscoring concerns over the effectiveness of public spending.

Nigeria’s financial system presents a mixed picture, according to the report. While the country remains one of Africa’s largest financial markets, its stock market capitalisation was equivalent to only 11.8 per cent of GDP, compared with 277.1 per cent in South Africa.

Non-performing loans, however, stood at 4.9 per cent, less than the recommended five per cent threshold and among the better readings recorded in the region.

Nigeria also maintained its position as a major recipient of remittances, receiving $19.54 billion in 2024, representing about 36 per cent of total remittance inflows to Sub-Saharan Africa.

The AfDB further highlighted the Nigeria Sovereign Investment Authority’s mobilisation of $2.2 billion through global syndication in 2024-25 as an example of how institutional capital can be channelled into infrastructure financing.

For Nigeria, the report identified tax administration, debt management and public investment efficiency as key areas that will determine whether recent macroeconomic improvements translate into stronger and more inclusive economic development.