Sovereign Debt: Why Repayment Capacity Matters More Than the Total Owed

A country’s debt should be judged mainly by its ability to repay, not by the size of the figure alone. Governments with strong revenue can service larger debts more comfortably than countries that spend most of their income on debt payments. Nigeria’s debt challenge is closely tied to its weak revenue base. When debt service consumes a large share of government revenue, less money is available for power, infrastructure, health and other productive investments. High-income countries often have higher tax-to-GDP ratios and larger nominal GDP figures, which makes their debt levels appear more manageable. Nigeria could strengthen its position by expanding production, improving electricity supply, developing steel capacity and raising sustainable public revenue. The wider argument is that global debt comparisons should account for differences in production costs, incomes and living standards across countries.

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