Nigeria’s Revenue Strained by Debt, Warns IMF

The International Monetary Fund (IMF) has sounded an alarm over Nigeria’s fiscal sustainability, revealing that a staggering 60 per cent of the nation’s revenue is devoted to servicing its debts, leaving scant funds for development initiatives. The message, delivered at the ongoing IMF/World Bank Annual Meetings in Washington DC, underscores the pressing need for Nigeria to reform its revenue generation strategy.

Davide Furceri, Division Chief of the IMF’s Fiscal Affairs Department, outlined the urgency of the situation. “A larger part of Nigeria’s revenue is swallowed by debt servicing,” he said, calling for a transparent and efficient tax collection system that broadens the revenue base. Furceri highlighted that while Nigeria has reduced its debt service-to-GDP ratio from 100 per cent to 60 per cent, this improvement is overshadowed by the continued pressure on the national budget. Without a stronger revenue-to-GDP ratio, he cautioned, Nigeria risks an ongoing fiscal imbalance that will hinder its capacity to invest in essential services and infrastructure.

In a Fiscal Monitor Report released on Thursday, the IMF also noted that Nigeria’s debt-to-GDP ratio, currently at 50.7 per cent, is projected to decline to 49.6 per cent by 2025, with gradual reductions expected through 2027. The report attributes this decrease to a recalibration of public debt, including Central Bank overdrafts and debt held by the Asset Management Corporation of Nigeria.

However, the IMF warned that reducing the debt-to-GDP ratio alone would be insufficient to address Nigeria’s fiscal challenges. Furceri urged the Nigerian government to implement targeted social safety nets to shield vulnerable communities from the impacts of inflation and environmental volatility, stressing that sustainable economic growth must include provisions for those most affected by economic turbulence.

Nigeria’s longstanding reliance on borrowing is again under scrutiny as the IMF reiterates that meaningful growth requires a more diversified and transparent approach to revenue mobilisation. Without critical reforms, Furceri concluded, the nation’s fiscal future remains precarious, hampered by debt obligations that overshadow the need for broader development.