The International Monetary Fund (IMF) has issued a stark warning to Nigeria over its rising debt levels, cautioning that excessive borrowing could cripple the country’s economic growth if not urgently addressed.
IMF Managing Director Kristalina Georgieva made the remarks on Monday during a civil society town hall held on the sidelines of the ongoing World Bank and IMF Annual Meetings. She emphasized that high debt burdens are limiting governments’ capacity to respond to economic challenges and invest in development.
“We have to be much more focused on bringing debt levels down because very high levels of debt suffocate economies,” Georgieva said.
Nigeria’s Debt Hits ₦152 Trillion
According to the Debt Management Office (DMO), Nigeria’s total public debt stood at ₦152.39 trillion as of June 30, 2025. This includes ₦80.55 trillion ($52.67 billion) in domestic borrowings and ₦71.84 trillion ($46.98 billion) in external debt.
The figure represents a sharp increase from ₦33.3 trillion in June 2023, marking a 348.6 per cent surge since President Bola Ahmed Tinubu assumed office.
Economists have repeatedly warned that Nigeria’s rapid debt accumulation could worsen inflationary pressures and limit fiscal flexibility, especially as debt servicing continues to consume a growing share of national revenue.
Debt Servicing Outpaces Revenue
The government’s debt service-to-revenue ratio — a key indicator of financial stress — has surged to 156.8 per cent as of early May 2025, up from 29.1 per cent in 2014.
This means that for every ₦100 the government earns, about ₦157 is spent servicing existing debt, leaving little room for capital investment, education, or healthcare funding.
To manage its obligations and fund infrastructure projects, the Tinubu administration recently sought parliamentary approval to raise $2.3 billion through Eurobonds and issue $500 million in sukuk to refinance maturing loans.
States Deep in Debt Too
Debt challenges are not limited to the federal level. Lagos State recorded the highest domestic debt in the first quarter of 2025 at ₦874.03 billion, followed by Rivers State with ₦364.39 billion.
At the other end of the spectrum, Jigawa posted the lowest domestic debt at ₦1.06 billion, while Ondo State stood at ₦11.76 billion.
Analysts warn that the growing debt exposure at both national and subnational levels could strain Nigeria’s ability to meet its development goals and increase reliance on external borrowing.
Global Debt Pressure
Georgieva noted that rising debt is not unique to Nigeria, stressing that many advanced and emerging economies are also grappling with ballooning fiscal pressures. However, she pointed out that low-income nations face the hardest challenges because of their limited access to affordable financing.
“Even if their debt levels are going down, it is still incredibly difficult for low-income countries to cope with these burdens,” she said.
The IMF boss revealed that the fund will intensify efforts to support countries in managing debt sustainability through targeted reforms and technical assistance.
Nigeria’s Balancing Act
As a lower-middle-income country, Nigeria continues to walk a fine line between funding development projects and maintaining fiscal stability.
Experts argue that the government must strengthen domestic revenue mobilization, reduce wasteful spending, and improve transparency in borrowing to prevent a full-blown debt crisis.
While the government defends its borrowing as essential for infrastructure and growth, the IMF’s warning underscores the urgency of adopting a sustainable fiscal strategy before debt levels spiral out of control.
Source: Guardian Newspapers
