The International Monetary Fund, IMF, has stated that Nigeria’s debt remains sustainable and the country is not currently at high risk of debt distress. However, the global financial institution has expressed concern over the growing burden of debt servicing on government finances.
Speaking during an interview on ARISE News, the IMF Resident Representative in Nigeria, Dr. Christian Ebeke, said the country’s biggest challenge is not the size of its debt but the large portion of government revenue being used to service it.
According to the IMF, nearly half of the Federal Government’s tax revenue between 2025 and 2028 is expected to go toward interest payments on existing debts, limiting available resources for critical sectors such as healthcare, education, security, and social welfare.
Dr. Ebeke explained that Nigeria’s debt-to-GDP ratio remains relatively low compared to many developing economies, standing in the mid-30 percent range. He also noted that the country’s debt portfolio benefits from a balanced mix of domestic and foreign borrowings, as well as longer repayment periods that reduce refinancing risks.
Despite these strengths, the IMF warned that Nigeria’s weak revenue base continues to pose a significant fiscal challenge. The institution stressed the importance of increasing government revenue through effective implementation of newly enacted tax laws and stronger tax collection mechanisms.
The IMF also expressed reservations about the Federal Government’s recently approved $5 billion Total Return Swap arrangement with the First Abu Dhabi Bank of the United Arab Emirates.
According to the Fund, the financing arrangement raises concerns over transparency, complexity, and potential hidden costs. The IMF noted that such transactions often involve risks that may not be immediately visible and could expose countries to financial pressure if economic conditions deteriorate.
Dr. Ebeke highlighted concerns about the requirement for Nigeria to provide substantial collateral for the deal, arguing that alternative financing options, including Eurobond issuances, may offer greater transparency and flexibility.
Beyond debt concerns, the IMF reiterated warnings about rising poverty levels across Nigeria. The institution noted that inflation, particularly food inflation, has significantly worsened living conditions for millions of citizens.
Citing estimates from the World Bank, the IMF said Nigeria’s poverty rate had reached approximately 63 percent by the end of 2025, underscoring the need for stronger social protection measures.
The Fund urged the government to strengthen safety net programmes, including cash transfer initiatives, to support vulnerable households affected by economic reforms and rising living costs.
While advocating greater domestic revenue generation, the IMF also emphasized the importance of building public trust through improved service delivery. According to the institution, any future increase in taxation should be accompanied by visible improvements in infrastructure, healthcare, education, and other public services.
The IMF maintained that achieving long-term economic stability requires a balance between fiscal reforms, revenue mobilisation, and targeted social interventions designed to protect vulnerable Nigerians.
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