NEWS
IMF Raises Alarm as Nigeria Set to Spend Over Half of Government Revenue on Debt Servicing in 2026
Nigeria may face increasing fiscal pressure in the coming years as the International Monetary Fund (IMF) projects that more than half of the country’s revenue will be devoted to servicing debt obligations in 2026, raising concerns about the government’s ability to adequately fund critical sectors of the economy.
The projection is contained in the IMF’s latest country assessment, which forecasts that the Federal Government’s interest payments will consume 53.7 percent of total revenue in 2026. This represents a slight increase from the 53.2 percent projected for 2025 and a significant rise from the 40.8 percent recorded in 2024.
According to the IMF, while the debt-service burden is expected to remain elevated, there could be a modest improvement in 2027 when the interest-to-revenue ratio is projected to decline slightly to 52.4 percent.
The report highlights the growing challenge facing Africa’s largest economy as policymakers continue efforts to balance debt obligations with the need to invest in infrastructure, healthcare, education, social welfare and security.
Despite the concerns surrounding debt servicing, the IMF offered a more optimistic outlook on some key economic indicators. The Fund projects that inflationary pressures will ease considerably, forecasting average inflation at 16 percent in 2026. It also expects Nigeria’s gross international reserves to strengthen significantly, rising from $40.2 billion in 2024 to $58.1 billion in 2026 before reaching $62 billion in 2027.
The projections suggest that while macroeconomic stability may improve in certain areas, the challenge of managing government finances remains a major concern.
“NIGERIA’S DEBT IS SUSTAINABLE, BUT DEBT-SERVICE BURDEN IS A CONCERN”
Providing further insight into the IMF’s assessment, the Fund’s Resident Representative in Nigeria, Christian Ebeke, explained that the country’s debt position remains manageable despite growing concerns over debt servicing costs.
Speaking on ARISE Television on Tuesday, Ebeke stated that Nigeria’s debt remains sustainable and that the country is not facing an immediate debt distress crisis.
“Our latest assessment in the Article IV that we just published on June 9 basically concludes that Nigeria’s debt is sustainable. And second, the risk of sovereign stress is actually moderate. So we don’t see Nigeria as a high-risk debt-distressed country,” Ebeke said.
According to him, Nigeria’s debt-to-GDP ratio remains relatively moderate when compared with many countries in similar economic circumstances. He noted that the country’s debt profile is supported by a combination of domestic and external borrowings, as well as relatively long repayment maturities that help reduce refinancing risks.
However, Ebeke stressed that the major challenge lies not in the size of the debt itself but in the substantial proportion of government revenue being used to service it.
“We actually estimate that in 2025 to 2028, the interest-to-revenue ratio, how much the federal government pays out of the tax it collects, is actually about 50 percent,” he said.
The IMF official warned that such a high debt-service burden could significantly constrain the government’s capacity to provide essential public services and implement social intervention programmes.
“When you have more than 50 percent of your tax collection devoted to repaying interest on your federal government debt, it leaves you very little room to actually pay for health, education, cash transfer, including security.”
The warning underscores concerns among economists that excessive debt-servicing obligations could undermine efforts to tackle poverty, improve healthcare delivery, expand educational opportunities and strengthen national security.
Ebeke noted that the IMF’s primary focus is to support Nigeria’s efforts to boost domestic revenue generation through the effective implementation of recently enacted tax reforms.
He explained that improving revenue mobilisation remains critical, particularly at a time when the country is grappling with multiple economic challenges, including inflationary pressures, widespread poverty and food insecurity.
The IMF representative further emphasized that the successful implementation and enforcement of Nigeria’s new tax laws would play a crucial role in expanding government revenue, reducing fiscal vulnerabilities and creating more room for public spending on development priorities.
As Nigeria continues to navigate economic reforms and fiscal adjustments, the IMF’s latest assessment presents a mixed picture, one that combines optimism about improving macroeconomic indicators with caution over a debt-service burden that continues to consume a substantial share of government income. The challenge for policymakers, analysts say, will be translating economic gains into stronger public finances capable of supporting sustainable development and improving the living conditions of millions of Nigerians.