Photo caption: IMF logo
Nigeria’s public external debt is projected to rise by $20.7bn by 2027, the country’s election year, according to the International Monetary Fund.
The IMF disclosed this in its 2026 Article IV Consultation report on Nigeria released on Tuesday, projecting that public external debt would increase from $51.9bn in 2025 to $72.6bn by 2027.
The projected increase represents a 39.9 per cent rise within two years and underscores growing concerns over the country’s debt burden despite recent improvements in macroeconomic stability.
The Fund noted that Nigeria’s next presidential election would take place in January 2027 and warned that spending pressures associated with rising poverty, food insecurity and the election cycle could widen fiscal deficits and increase borrowing requirements.
“Spending pressures from elevated poverty and food insecurity, including in the run-up to the elections, could widen fiscal deficit and increase financing needs,” the IMF stated.
According to the Fund’s Balance of Payments projections, public external debt is expected to rise from $51.9bn in 2025 to $66.5bn in 2026 before climbing further to $72.6bn in 2027.
The IMF’s projection broadly aligns with the latest Debt Management Office data, which showed that Nigeria’s public external debt stood at $51.86bn as of December 31, 2025.
Based on the Fund’s forecast, the debt stock would increase by about $20.74bn between the end of 2025 and 2027.
Beyond public debt, the IMF projected that Nigeria’s total external debt stock, which includes both public and private sector obligations, would rise from $109.3bn in 2025 to $119.3bn in 2026 and further to $132.0bn in 2027.
This indicates that total external debt could increase by $22.7bn between 2025 and 2027, with $12.7bn of the increase occurring in 2027 alone.
The report showed that public external debt would remain elevated relative to the size of the economy and export earnings. Public external debt is projected to increase from 17.9 per cent of GDP in 2025 to 18.7 per cent in 2027. As a share of exports of goods and services, it is expected to rise from 82.9 per cent in 2025 to 104.3 per cent by 2027.
The IMF also projected a deterioration in debt service indicators over the period.
Public external debt service due is expected to increase from 8.1 per cent of exports of goods and services in 2025 to 8.8 per cent in 2027, after easing to 5.0 per cent in 2026. The Fund further projected that interest payments on public debt would rise from $2bn in 2025 to $3bn by 2027.
At the Federal Government level, debt servicing is expected to continue consuming more than half of government revenue. The IMF estimated that interest payments absorbed 53.2 per cent of Federal Government revenue in 2025 and projected the ratio at 53.7 per cent in 2026 before easing marginally to 52.4 per cent in 2027.
The report highlighted the growing role of external borrowing in financing government operations. According to the IMF, financing for the 2026 consolidated government deficit is expected to rely more on external than domestic sources, with plans including a proposed $5bn total return swap with an international bank and another Eurobond issuance.
The Fund expressed reservations about the proposed swap arrangement, noting that it carried borrowing costs comparable to Eurobond yields and could expose the government to margin calls if the value of the naira-denominated collateral declines.
“The arrangement exposes the government to margin calls if the FX value of the naira securities drops (naira depreciation, higher interest rates) and could thus give rise to political constraints on monetary or exchange rate policy,” the IMF said.
The PUNCH earlier reported that the IMF warned Nigeria to tread carefully in pursuing a proposed $5bn Total Return Swap financing arrangement with First Abu Dhabi Bank, describing such structures as opaque and potentially risky despite the country’s improved access to international capital markets.
The IMF Resident Representative for Nigeria, Christian Ebeke, disclosed this on Tuesday during a virtual press briefing on the Fund’s 2026 Article IV Consultation Report on Nigeria.
Speaking on the proposed transaction, Ebeke said, “We say in the report, and our view is that the transaction and these types of structures carry risks. Usually, they are opaque. So, the terms are not always very transparent when we review these instruments across countries.”
His comments come weeks after the Senate approved the Federal Government’s request to raise up to $5bn through a Total Return Swap arrangement with a Middle Eastern bank, widely reported to be First Abu Dhabi Bank.
Ebeke noted that beyond concerns over transparency, such financing arrangements could expose countries to additional financial risks if underlying assets lose value or exchange rates move adversely. “They also carry risk, as we flag in the report: the margin calls in the case of the value of the asset drops or the currency depreciates,” he said.
According to him, Nigeria currently has alternative funding options that may be less complicated and more transparent. “We think that Nigeria has market access. Nigeria can issue euro bonds to finance the deficit. And we also think that there are other avenues for Nigeria to raise funds, including on concessional terms,” Ebeke added.
While noting that the Fund did not yet have detailed information on the proposed swap structure, he urged authorities to closely monitor the transaction’s potential risks. “At this point, we don’t have any further information on the TRS. But our view is that it carries risk, and it’s important to monitor those risks very, very carefully,” he said.
The IMF’s caution formed part of a broader assessment in which the Fund acknowledged that economic reforms undertaken by the Nigerian government over the past three years had strengthened macroeconomic stability and improved the country’s ability to withstand external shocks.
Despite the projected increase in debt, the Fund maintained that Nigeria’s sovereign debt position remains manageable. “The risk of sovereign stress is assessed as moderate,” the IMF stated, noting that public debt fell to 36.1 per cent of GDP in 2025 from 39.3 per cent in 2024 due to stronger growth, naira appreciation and improvements in macroeconomic stability.
However, it warned that weak revenue mobilisation, expenditure slippages, contingent liabilities and election-related fiscal pressures could worsen the debt outlook if not carefully managed.
The Fund urged the government to strengthen fiscal transparency, improve budget implementation, sustain revenue mobilisation reforms and avoid spending outside the budget framework in order to contain borrowing needs and preserve debt sustainability.
At the virtual briefing, the IMF Mission Chief for Nigeria, Axel Schimmelpfennig, said recent reforms had enhanced resilience and helped the country manage the economic fallout from the ongoing conflict in the Middle East. “One of the key messages from the report is that strong reforms over the past three years have improved macroeconomic outcomes and improved resilience,” he said.
According to Schimmelpfennig, higher global oil prices resulting from the conflict could improve Nigeria’s export earnings and government revenues, but would also create inflationary pressures through increased fuel, food and fertiliser costs.
He said the IMF recommended a broadly neutral fiscal stance for 2026, with the budget deficit remaining largely unchanged relative to 2025 to support macroeconomic stability and complement the Central Bank of Nigeria’s efforts to curb inflation.
“We continue to think that the flexible exchange rate regime is serving Nigeria well, and we’ve even seen an appreciation against the US dollar since the start of the year,” he said.
The IMF also projected that Nigeria’s economy would grow by 4.1 per cent in 2026 and 4.3 per cent in 2027, although these forecasts were lower than previous projections due to the economic consequences of the conflict in the Middle East. “For 2026, we project real GDP growth to be 4.1 per cent. And for 2027, we see some acceleration to 4.3 per cent,” Schimmelpfennig stated.
He stressed that monetary policy should remain restrictive for longer than previously anticipated, given renewed inflationary pressures stemming from global developments.
The IMF chief further urged the government to continue expanding its cash transfer programme to cushion the impact of economic shocks on vulnerable households while sustaining reforms aimed at improving infrastructure, electricity supply, security, agriculture, education and healthcare.
The Fund also reiterated its support for efforts to increase government revenue, noting that Nigeria remains one of the countries with the lowest revenue-to-GDP ratios globally.
Schimmelpfennig said strengthening tax administration and, over time, aligning some tax rates with those of peer countries would be necessary to create fiscal space for development spending, while ensuring that vulnerable citizens are protected through targeted social interventions.
Obi tackles FG
In a related development, the 2027 presidential candidate of the Nigeria Democratic Congress, Peter Obi, has criticised President Bola Tinubu’s administration over what he described as excessive borrowing and poor fiscal accountability.
Obi said Nigeria’s total public debt has risen to about N200tn, which he attributed to what he called “imprudent governance” under the current administration. He said the debt level represents an increase of over N100tn in three years, contrasting it with the approximately N49tn accumulated during the eight-year administration of former President Muhammadu Buhari.
The former Labour Party presidential flagbearer in the 2023 election stated this in a statement posted on his X handle on Tuesday, saying the situation reflected a lack of accountability and transparency in the management of borrowed funds.
“President Bola Tinubu’s administration has engaged in remarkably imprudent borrowing, escalating Nigeria’s total debt to approximately N200tn. This represents an increase of over N100tn within a mere three years, a stark contrast to the roughly N49tn accumulated during President Muhammadu Buhari’s eight-year tenure, which would have projected to around N80tn.
“As millions of Nigerians grapple with the shock of this unsustainable debt accumulation, the situation is exacerbated by the government’s reckless approach to borrowing and a profound absence of accountability and transparency in the utilisation of these funds,” he said.
However, the Presidency has dismissed claims by Obi that the administration of President Bola Tinubu has accumulated more than N100tn in debt within three years, attributing the increase in Nigeria’s debt profile largely to the impact of naira devaluation.
Special Assistant to the President on Social Media, Dada Olusegun, stated this on Tuesday while responding to Obi’s criticism of the government’s borrowing record and fiscal management.
“For the umpteenth time, Nigeria’s obvious debt portfolio increase over the past three years under the administration of President Tinubu is not a function of new borrowings rather; vast majority of them are mathematical impacts of currency devaluation which you also promised to implement during your campaigns,” Olusegun said.
Olusegun also maintained that Nigeria’s public debt figures include obligations incurred by state governments over the years and should not be attributed solely to the Federal Government.
Questioning Obi’s interpretation of the debt figures, the presidential aide said fluctuations in exchange rates significantly affect the naira value of external debt. The aide further argued that Nigeria’s debt stock in dollar terms had remained relatively stable.
=== PUNCH ===
