As a measure to keep Nigeria’s debt-service-to-revenue ratio in check, the Nigerian Economic Summit Group (NESG) has urged the federal government to broaden the non-oil tax base to improve its fiscal position.
The Group made the call in its latest ‘Macroeconomic Condition Index (MCI)’ report it published on Wednesday, October 8.
It observed that debt service absorbs all of government revenue as Nigeria’s debt-service-to-revenue ratio was above 100 per cent in 2024, stating that it stood at 116.8 per cent in 2024, and at 113 per cent in the first quarter of this year.
This means that the federal government is spending all of its revenue on debt payment.
“With debt service now absorbing more than the entire federal government revenue, Nigeria must broaden its non-oil tax base through improved efficiency in collection, expansion of the VAT net, and rationalisation of exemptions, alongside improving spending efficiency and blocking expenditure leakages,” NESG stated.
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The Group noted that the removal of petrol subsidy and the unification of the exchange rate have expanded fiscal space, but the benefits risk being eroded without deeper reforms to tax administration and expenditure management.
It is expected that when the new tax laws fully come into effect from 2026, the Acts are expected to create new traction in revenue mobilisation, strengthen the fiscal base, and reduce overdependence on debt.
According to the NESG, the MCI framework adopts a systemic lens, capturing four macroeconomic performances:
- Real Sector Index (RSI): measures growth, inflation dynamics, and production resilience.
- Fiscal Sector Index (FSI): reflects government solvency and liquidity constraints.
- Monetary & Financial Sector Index (MSI): tracks money market and financial stability signals.
- External Sector Index (ESI): gauges external vulnerability through trade and financial flows, movement.
It said the FSI fell sharply to -6.8 points in 2024, weighed down by the rising debt-to-gross domestic product (GDP) ratio of 40.6 per cent and growing recurrent obligations, before improving marginally to -6.4 points in early 2025.
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Amid the hope of a reformed tax regime, the NESG called for realistic budget assumptions, stronger audit and procurement laws, and a shift from short-term borrowing to long-term, concessional financing that supports capital investment.
“The gains from reforms will only materialise if complemented by transparent utilisation of revenues and efficient public spending,” It said.
MCI’s estimate plunged in 25 years
In 2024, MCI estimates plunged to -3 points 2024, the lowest level in 25 years, reflecting simultaneous pressures across the real, fiscal, and external sectors following wide-ranging government reforms.
It said the sharp deterioration was the by-product of sweeping reforms that amplified near-term distortions across key sectors.
In the first quarter of this year, however, it marked a turning point, improving to -1.8 points, signalling the waning of initial reform shocks and the emergence of stabilisation gains.
It noted that the external sector index also turned positive for the first time in over a year, warning that productivity remains weak, fiscal obligations still heavy, and inflationary pressures high.
It urged the government to prioritise structural reforms that translate macroeconomic stability into an inclusive, broad-based recovery.
Sign of economic recovery, but…
According to the NESG, Nigeria is experiencing modest progress in stabilising the exchange rate and easing inflation, however, its fiscal weakness remains the biggest threat to sustainable recovery.
As of the first quarter of the year, Nigeria’s macroeconomic environment showed signs of stability after more than two decades.
“Taken together, these developments suggest that 2024 marked the low point of macroeconomic strain, driven by painful but necessary reforms, while early 2025 has begun to reflect the first fruits of policy adjustment,” it stated.
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It warned, however, that “the persistence of weak productivity, high inflation, and heavy fiscal obligations underscores that the road to durable resilience remains long.”
Way forward
The NESG noted that going forward, the country’s challenge is not only to consolidate the stabilisation gains of early 2025 but also to translate them into broad-based recovery through structural reforms that lift productivity, deepen fiscal capacity, and sustain external stability.
It suggested that the way forward requires integrated macroeconomic management anchored on stability and resilience.
“Fiscal reforms, including the implementation of the newly signed Nigerian Tax Acts, 2025, must go hand in hand with disciplined expenditure and growing investments.
“Monetary policy must continue to reinforce confidence and ensure price stability, while financial sector recapitalisation builds buffers against shocks.
“At the same time, bold and urgent measures to boost productivity in both the industrial and informal sectors are critical to drive inclusive growth and expand the economy’s productive frontier,” NESG said.
The Group added that external sector reforms should prioritise competitiveness, non-oil export growth, and capital flow stability.
“As Nigeria navigates 2025 and beyond, embedding the MCI into regular policy monitoring and public communication will help strengthen accountability, provide early warning signals, and ensure that stability and resilience are not episodic achievements but enduring features of Nigeria’s economic trajectory,” it added.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
