Nigeria’s external debt to surge to $72.6bn by 2027 – IMF

Nigeria’s external debt to surge to $72.6bn by 2027 – IMF

 

Nigeria’s public external debt is expected to surge to $72.6 billion by 2027, according to the International Monetary Fund (IMF).

 

The agency warned that rising spending pressures, food insecurity and activities ahead of the next general elections could place fresh strain on government finances.

 

The projection is contained in the IMF’s 2026 Article IV Consultation Report on Nigeria released on Tuesday.

 

The report estimated that the country’s public external debt will rise from $51.9 billion in 2025 to $66.5 billion in 2026 before climbing further to $72.6 billion the following year.

 

The forecast represents an increase of $20.7 billion within two years, equivalent to nearly 40 per cent growth in Nigeria’s external debt obligations.

 

According to the Fund, increasing fiscal pressures linked to poverty and food insecurity could widen budget deficits and force authorities to seek additional financing.

 

“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.

 

The IMF also projected that Nigeria’s overall external debt stock, covering both public and private sector obligations, would rise from $109.3 billion in 2025 to $132 billion by 2027.

 

The report also signalled a deterioration in key debt indicators over the period. Public external debt is expected to increase from 17.9 per cent of Gross Domestic Product (GDP) in 2025 to 18.7 per cent in 2027, while the ratio of debt to exports is projected to jump from 82.9 per cent to 104.3 per cent.

 

Debt servicing costs are likewise forecast to increase, with interest payments on public debt rising from $2 billion in 2025 to $3 billion by 2027.

 

At the federal level, the IMF said interest payments would continue to consume more than half of government revenues, projecting the ratio to remain above 52 per cent through 2027.

 

To fund budget shortfalls, the Federal Government is expected to rely more heavily on external financing sources, including a proposed $5 billion Total Return Swap (TRS) arrangement and a fresh Eurobond issuance.

 

The IMF, however, expressed reservations about the proposed TRS deal, warning that the financing structure could expose the country to substantial financial risks.

 

IMF Resident Representative in Nigeria, Christian Ebeke, described such arrangements as opaque and potentially vulnerable to market shocks.

 

“We think that Nigeria has market access. Nigeria can issue Eurobonds to finance the deficit, and there are other avenues for raising funds, including concessional financing,” Ebeke said during a virtual briefing.

 

Despite the projected increase in borrowing, the Fund maintained that Nigeria’s debt remains sustainable and assessed the country’s risk of sovereign debt distress as moderate.

 

It noted that public debt declined to 36.1 per cent of GDP in 2025 from 39.3 per cent in the preceding year, attributing the improvement to stronger economic growth, appreciation of the naira and broader macroeconomic gains.

 

The IMF urged the authorities to sustain fiscal reforms by strengthening revenue generation, improving transparency, enforcing spending discipline and limiting off-budget expenditures.

 

IMF Mission Chief for Nigeria, Axel Schimmelpfennig, said economic reforms implemented in recent years had improved resilience and enhanced the country’s capacity to withstand external shocks.

 

He added that the Nigerian economy is projected to expand by 4.1 per cent in 2026 and 4.3 per cent in 2027, although the forecasts were revised downward due to the economic impact of the ongoing conflict in the Middle East.

 

The IMF report came as a fresh political dispute erupted over Nigeria’s debt profile.

 

Presidential candidate of the Nigeria Democratic Congress (NDC), Peter Obi, had accused the administration of President Bola Ahmed Tinubu of excessive borrowing and inadequate fiscal accountability.

 

Obi claimed that Nigeria’s total public debt had risen to about N200 trillion under the current administration, representing an increase of more than N100 trillion within three years.

 

He questioned the utilisation of borrowed funds and argued that the pace of borrowing had surpassed levels recorded under former President Muhammadu Buhari.

 

The Presidency swiftly dismissed the allegations, insisting that exchange rate adjustments accounted for a significant portion of the increase in debt figures.

 

Special Assistant to the President on Social Media, Dada Olusegun, said the sharp rise reflected the naira value of existing foreign obligations following currency devaluation rather than an equivalent increase in fresh borrowing.

 

He further argued that Nigeria’s total public debt includes obligations incurred by state governments and should not be attributed solely to the Federal Government.