Rising borrowing and global risks threaten fiscal stability as government faces mounting pressure….
Nigeria’s debt burden is projected to rise further in the coming years, with the International Monetary Fund warning that the country’s debt-to-GDP ratio could climb to 33.1 percent by 2027, coinciding with a crucial election cycle.
The latest forecast, contained in the IMF’s Fiscal Monitor report released in Washington, reflects a slight improvement from an earlier estimate of 35.3 percent. However, it still marks an increase from the 32.3 percent projected for 2026, signaling a steady upward trend in the country’s debt profile.
The projection comes amid growing concerns over Nigeria’s rising public debt. Data from the Debt Management Office shows total debt reached N159.27 trillion by the end of the fourth quarter of 2025. This represents a sharp increase of nearly N6 trillion from the previous quarter and a year-on-year rise of N14.6 trillion.
At the same time, the administration of Bola Ahmed Tinubu is seeking legislative approval for fresh external borrowing of about $6 billion, a move that could further expand the country’s debt stock.
Global pressures add to Nigeria’s challenge
Beyond domestic borrowing, the IMF cautioned that the global fiscal environment is becoming increasingly fragile.
According to the report, worldwide public debt climbed to nearly 94 percent of GDP in 2025 and is on track to hit 100 percent by 2029, a level not seen since the aftermath of World War II.
The Fund also highlighted growing “debt-at-risk,” projecting it could rise to 117 percent of global GDP within three years under adverse conditions.
Key risks include:
- Prolonged geopolitical tensions, particularly in the Middle East
- Rising food and energy prices
- Tighter global financial conditions
- Increased defence spending by governments
A sustained conflict could push global debt levels even higher, further complicating fiscal management for emerging economies like Nigeria.
IMF warns against risky policy choices
Speaking on the report, Rodrigo Valdés urged governments to act cautiously, stressing the importance of rebuilding fiscal buffers while protecting vulnerable populations.
He warned that delaying necessary fiscal adjustments could worsen future crises, leaving countries with limited room to respond.
Valdés also cautioned against broad energy subsidies and aggressive spending measures, arguing that such policies:
- Distort market signals
- Strain public finances
- Are difficult to reverse
Instead, he advised countries especially low-income economies to strengthen domestic revenue generation and adopt clear, credible fiscal strategies.
What it means for Nigeria
For Nigeria, the IMF’s outlook underscores a delicate balancing act.
On one hand, the government must continue investing in growth and infrastructure. On the other, rising debt levels could:
- Increase borrowing costs
- Pressure the naira
- Limit fiscal flexibility in future crises
With elections approaching in 2027, the trajectory of public debt is likely to become an even more sensitive economic and political issue.
The message from the IMF is clear: while Nigeria’s debt remains manageable for now, the margin for error is narrowing and the choices made in the next few years will be critical to maintaining long-term stability.
