Refinancing Risk and Public Debt Management in Nigeria

Nigeria's public debt architecture has grown increasingly fragile over the past four decades. The convergence of high domestic borrowing costs, shortening debt maturities, declining oil revenues, and persistent fiscal deficits has elevated refinancing risk to the front rank of macroeconomic vulnerabilities. Yet scholarly attention to this particular nexus, how the structure and composition of public debt intersect with the ever-present risk of failing to roll over maturing obligations on acceptable terms, remains underdeveloped in the Nigerian context. This paper addresses that gap by examining the dynamic relationship between refinancing risk and public debt sustainability in Nigeria over the period 1986–2025. Drawing on annual time-series data from the Central Bank of Nigeria (CBN), the Debt Management Office (DMO), the World Bank, and the International Monetary Fund (IMF), the study employs an Autoregressive Distributed Lag (ARDL) bounds testing framework augmented with a Vector Error Correction Model (VECM) to capture both short-run dynamics and long-run equilibrium adjustments. Twelve control variables are incorporated: GDP growth rate, inflation rate, interest rate, exchange rate, debt-to-GDP ratio, debt service-to-revenue ratio, debt maturity structure, governance quality, fiscal discipline, monetary policy framework, global interest rates, and commodity prices (represented primarily by crude oil prices). The results reveal that refinancing risk exerts a statistically significant and positive long-run effect on the public debt burden, while debt maturity structure, fiscal discipline, governance quality, and oil price volatility emerge as the most consequential moderating factors. Short-run dynamics indicate that negative shocks to oil revenues and exchange rate depreciations can rapidly amplify rollover pressures, creating a pro-cyclical feedback loop that deepens debt accumulation. The findings underscore the urgent need for Nigeria to extend the average maturity of its domestic debt portfolio, diversify its revenue base beyond petroleum, strengthen institutional governance frameworks, and align monetary and fiscal policies toward a coherent debt sustainability strategy. The study contributes a novel empirical framework to the extant literature and offers actionable policy prescriptions for low-income oil-dependent economies facing structural refinancing vulnerabilities.