The International Monetary Fund (IMF) has revealed that Nigeria allocates a substantial portion of its revenue to debt servicing, which restricts funding for essential development initiatives
In a recent Fiscal Monitor press briefing at the ongoing IMF/World Bank Annual Meetings in Washington, DC, Davide Furceri, Chief of the IMF’s Fiscal Affairs Department, underscored the urgent need for Nigeria to adopt more effective revenue mobilization strategies to ease this financial pressure.
He pointed out that Nigeria’s debt service-to-revenue ratio is around 60 percent, significantly hampering the government’s ability to invest in essential social and economic programs. Although the debt service-to-GDP ratio has declined from nearly 100 per cent to 60 percent, he stressed that the country must further reduce the share of its revenue allocated to debt repayments by focusing on broadening its tax base.
He explained that, “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 mobilization, they will be able to reduce the portion of the revenue that goes into debt servicing. “It is important to broaden the tax base in order to have more revenue, 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.”
Furceri also pointed to the impact of rising food prices and droughts on Nigeria’s economy, calling for transparent mechanisms to ensure that government resources reach the most vulnerable populations. He stressed the importance of balancing revenue growth with targeted social safety nets, especially in countries like Nigeria that are facing both fiscal and humanitarian challenges.
The IMF’s Fiscal Monitor Report, projected that Nigeria’s debt-to-GDP ratio, currently at 50.7%, is anticipated to decrease to 49.6% by 2025. The report noted that Nigeria’s public debt includes overdrafts from the Central Bank of Nigeria and liabilities from the Asset Management Corporation of Nigeria. Further forecasts predict the debt-to-GDP ratio will decline to 48.5% in 2026 and 48.2% in 2027, with a slight increase to 48.8% in 2028 and 49.1% in 2029.
The IMF emphasized that, in addition to revenue growth, the government should implement targeted social safety nets to protect vulnerable populations from the impacts of inflation and environmental challenges.
