Nigeria’s Debt-to-GDP Ratio Set to Decline to 35% by 2026 — IMF

Fiscal Monitor hails progress on tax reforms, fiscal discipline at Washington meetings

Nigeria’s general government gross debt is projected to decline steadily over the next two years, signaling improved fiscal discipline and economic stability, according to the latest International Monetary Fund (IMF) Fiscal Monitor Report released during the ongoing Annual Meetings of the IMF and World Bank in Washington D.C.

The report forecasts that Nigeria’s debt-to-GDP ratio will drop from 39.3 percent in 2024 to 36.4 percent in 2025, and further to 35 percent in 2026, reflecting a sustained effort toward fiscal consolidation, enhanced revenue generation, and prudent debt management by the Tinubu administration.

According to the IMF, the debt figures include Central Bank of Nigeria (CBN) overdrafts and liabilities of the Asset Management Corporation of Nigeria (AMCON), ensuring a comprehensive measure of Nigeria’s total public obligations.

Fiscal Reforms Driving Stability

The IMF stated that the projected decline in Nigeria’s debt burden signals a gradual improvement in debt sustainability, driven by fiscal discipline, reform in tax administration, and renewed efforts to diversify revenue sources. A falling debt-to-GDP ratio indicates that the size of Nigeria’s debt is shrinking relative to its growing economy—an encouraging trend for investors and development partners.

At a press briefing in Washington, Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department, noted that Nigeria’s fiscal stance remains consistent with efforts to curb inflation, sustain growth, and strengthen fiscal buffers.

Gaspar was joined by Era Dabla-Norris (Deputy Director), Davide Furceri (Division Chief), and Tatiana Mossot (Senior Communications Officer) of the IMF’s Fiscal Affairs Department, who fielded questions on Nigeria’s reform trajectory, borrowing plans, and macroeconomic policies.

“The policies being implemented in Nigeria are consistent with a structural fiscal framework that strengthens both the revenue and expenditure sides of government operations,” Gaspar said. “There is still room to improve tax administration and spending efficiency while expanding social programmes to protect vulnerable groups.”

He highlighted Nigeria’s recent strides in tax reform, including the simplification of tax codes, reduction of tax expenditures, and the push for a fairer, more efficient tax system that minimizes pressure on low-income earners and the business community.

According to Gaspar, Nigeria’s fiscal reforms are helping to reduce dependence on borrowing while encouraging stronger domestic resource mobilization and better management of public spending.

“Rebuilding fiscal buffers is crucial to safeguard the economy from future shocks,” he added. “Countries must act now to strengthen fiscal discipline, build resilience, and enhance growth prospects through effective public spending and institutional reforms.”

IMF Urges Caution Amid Global Debt Pressures

While Nigeria’s outlook appears stable, the IMF warned that global public debt levels are surging, with the worldwide debt-to-GDP ratio projected to exceed 100 percent—the highest since 1948. Gaspar cautioned that under adverse conditions, global debt could soar to 124 percent of GDP by 2029, driven by higher borrowing costs, rising defense expenditure, and climate-related spending pressures.

“Starting from already high deficits and debts, the persistence of spending above revenue will push debt to ever higher levels,” Gaspar warned.

The Fiscal Monitor also revealed that interest spending is projected to rise to 2.9 percent of global GDP by 2025, up from 2 percent in 2020, with higher borrowing costs increasingly straining public budgets, especially in developing economies.

Diverging Fiscal Realities

The IMF report underscored widening fiscal disparities between advanced economies and emerging markets. Major economies like the United States, Japan, France, Italy, and the United Kingdom continue to carry debt levels above 100 percent of GDP, yet benefit from deep financial markets and strong policy credibility.

In contrast, many emerging and low-income countries, including several in Sub-Saharan Africa, face tighter financing conditions, limited policy flexibility, and heightened fiscal vulnerability. According to the IMF, 55 countries are currently at high or distressed fiscal risk levels.

Nigeria’s Reform Momentum

Nigeria’s recent fiscal reforms—spanning tax digitization, subsidy removal, and tighter monetary-fiscal coordination—are seen by analysts as steps in the right direction. The government’s commitment to improving the efficiency of spending and increasing social investment could further strengthen growth prospects and reduce inequality.

“Enhancing spending efficiency, improving governance, transparency, and accountability are crucial to building citizens’ and investors’ trust,” Gaspar said. “These are key elements for sustainable financing and inclusive development.”

The IMF reaffirmed its commitment to supporting Nigeria in designing policies that promote sustained growth, safeguard macroeconomic stability, and restore public trust in fiscal institutions.

Broader Fiscal Implications

The projected decline in Nigeria’s debt profile is expected to improve investor confidence, ease foreign exchange pressure, and provide fiscal room for infrastructure and social spending. Analysts note that a stronger naira, rising oil production, and expanding non-oil revenues could help accelerate the downward debt trend, provided fiscal discipline is maintained.

Data Snapshot — Nigeria’s Debt-to-GDP Outlook (IMF Projections)

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Reporting by Godwin Okafor, The Naija247news in Lagos, Nigeria.