IMF and the Issue of Debt Management

Government should do well to heed the warning

The International Monetary Fund (IMF) has recently warned that Nigeria’s public debt could rise from $51.9 billion in 2025 to $72.6 billion by 2027. The agency cited 2027 general‑election spending, food insecurity, and complex, opaque borrowing structures as major strains on public finances. It also cautioned against a proposed $5 billion Total Return Swap (TRS) with First Abu Dhabi Bank, noting that such derivatives could expose the country to severe margin calls if the naira depreciates. We hope the federal government will heed this warning.

While acknowledging that the current administration’s reforms have strengthened macroeconomic stability and improved resilience to external shocks, the IMF warned that weak revenue mobilisation, expenditure slippages, contingent liabilities, and other factors could worsen the debt outlook if not carefully managed. The World Bank echoed concerns about the debt‑service‑to‑revenue ratio, arguing that reduced earnings could render the debt unsustainable. Analysts also caution that frequent borrowing by federal and state governments may lead the country into another debt trap if restraint is not exercised.

In 2005, Nigeria negotiated a debt write‑off of about $18 billion after a cash payment of roughly $12 billion, freeing the nation from Paris Club debts exceeding $30 billion, most of which were accumulated interest and charges. Many of those loans were secured in the 1980s to fund projects that proved to be white‑elephant ventures and reflected the profligacy of earlier administrations. The public perception is that the government has failed to plug leakages and wastes, which have become institutionalised in the states.

The Debt Management Office (DMO) reported that total public debt reached N159.27 trillion by the end of 2025. This figure includes domestic and external debt stocks of the federal and sub‑national governments—the 36 states and the Federal Capital Territory (FCT). Since then, additional borrowings, many for questionable projects, have increased the debt burden. We are particularly concerned about the debts accumulating in the states. While borrowing to bridge gaps between federation account allocations and developmental needs in infrastructure, health, education, power, and transportation could be justified, that is not the current reality. Questions arise about the necessity of further borrowing when states receive substantial resources from the federation account following the removal of fuel subsidies and the harmonisation of naira exchange rates.

High poverty indices complicate understanding the choices made by government officials at all levels and the recklessness that drives some loan‑funded projects. Many projects are bizarre in conception and clearly irresponsible in terms of the funds expended. More worrisome is that these debts, borne by future generations, finance projects that yield little or no returns. Many of these debts appear to be taken not to meet public needs but to facilitate various forms of economic mischief.