The International Monetary Fund has highlighted a significant challenge in Nigeria’s fiscal structure noting a substantial portion of the country’s revenue is dedicated to debt servicing, leaving minimal room for essential development investments.
The PUNCH reported that Division Chief of the IMF’s Fiscal Affairs Department, Davide Furceri, discussed this during the Fiscal Monitor press briefing held at the ongoing IMF/World Bank Annual Meetings in Washington, D.C., urging Nigeria to improve revenue mobilization to alleviate this financial strain.
Furceri shared that Nigeria’s debt service-to-revenue ratio currently stands around 60%, a considerable constraint on government funds that could otherwise support social and economic programs.
While he acknowledged a decrease in the debt service-to-GDP ratio—down from close to 100% to around 60%—Furceri emphasized the need for Nigeria to further decrease the portion of revenue channeled toward debt repayments, primarily by expanding the country’s tax base.
He explained, “There is a need to grow the revenue-to-GDP ratio. For a country like Nigeria, the Debt Service-to-Revenue is about 60 per cent. What that means is that a larger part of the revenue of the country goes into debt servicing. What we recommend for countries like Nigeria, if they can improve their revenue mobilisation, they will be able to reduce the portion of the revenue that goes into debt servicing.”
Furceri advocated for a transparent and effective tax collection system as a cornerstone for revenue enhancement, advising Nigeria to establish mechanisms that would support efficient and reliable revenue collection.
“It is important to broaden the tax base in order to have more revenue,” he noted, “and especially in Nigeria to put in place a system and mechanism that is transparent and efficient to assist the government in collecting more revenue.”
The IMF’s Fiscal Monitor Report, published on Thursday, provides additional insights, noting that Nigeria’s debt-to-GDP ratio is expected to decrease from the current level of 50.7% to 49.6% by 2025.
The report highlighted that Nigeria’s public debt encompasses overdrafts from the Central Bank of Nigeria as well as liabilities from the Asset Management Corporation of Nigeria.
“The overdrafts and government deposits at the Central Bank of Nigeria almost cancel each other out, and the Asset Management Corporation of Nigeria debt is roughly halved,” the report added.
Projections also suggest a continued decline in the debt-to-GDP ratio, forecasting it to fall to 48.5% in 2026, 48.2% in 2027, with a minor increase to 48.8% in 2028 and 49.1% in 2029.
To further secure economic stability, the IMF recommended that alongside revenue growth, Nigeria should deploy targeted social safety nets to shield vulnerable communities from the impacts of inflation and environmental issues.
