Fiscal Sustainability Under Pressure: An Empirical Analysis of Nigeria’s Debt Service Dynamics, 2000–2023

Nigeria’s rising debt service obligations have generated serious concerns about fiscal sustainability and development financing. This study analyses the trajectory of debt service expenditure relative to federal recurrent spending from 2000 to 2023, highlighting its implications for economic stability and public investment. Using time series data from official government sources, the research applies fiscal sustainability indices, debt service coverage ratios, and a vector error correction model to examine both long-term dynamics and short-term crowding-out effects. The findings show that debt service increased from ₦131.05 billion (28.4% of recurrent expenditure) in 2000 to ₦8,556.93 billion (59.9%) in 2023, creating unsustainable fiscal pressures. Results reveal significant crowding-out of social and economic services, with debt service growth negatively affecting human capital and infrastructure investment. The study concludes that Nigeria’s current debt trajectory is incompatible with long-term fiscal sustainability and recommends debt restructuring, improved revenue mobilization, and fiscal rules to safeguard development spending. By linking debt dynamics to development outcomes, this research provides evidence-based insights for policymakers and contributes to broader debates on sustainable public finance in emerging economies.