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The International Monetary Fund (IMF) has projected Nigeria’s public debt to Gross Domestic Product (GDP) ratio to increase to 46.6 percent in 2024 and further to 46.8 percent in 2025. This represents a 0.3 percentage points and 0.5 percentage points growth respectively compared to the IMF’s projection for 2023.
The IMF disclosed these projections in its April 2024 Fiscal Monitor report titled: “Fiscal policy in the great election year.” Additionally, the IMF downgraded Nigeria’s fiscal balance-to-GDP ratio to -4.6 percent in 2024 from -4.2 percent in 2023.
The report highlighted that in low-income developing countries, including Nigeria, large shares of loans on concessional terms, high inflation rates, and favorable interest-growth differentials have contributed to containing average public debt-to-GDP ratios at around 50 percent of GDP since 2020. However, there was an uptick to 53 percent of GDP in 2023, primarily driven by exchange rate depreciation in Nigeria.
Furthermore, the IMF emphasized the significant debt-service burden faced by countries in this category, with Nigeria’s debt-service burden amounting to around 56 percent of tax revenues. High debt-servicing costs restrict these countries from allocating more resources to essential services and critical investments necessary to improve economic resilience and reduce poverty.
The report also noted the risks associated with debt refinancing, particularly for low-income developing countries, as substantial external debt repayments amounting to about $60 billion are due in 2024–25, which is three times the average in the 2010s.
In response to these challenges, the IMF emphasized the importance for governments to carefully evaluate the trade-offs between current financing needs and future fiscal sustainability associated with issuing public debt at high costs. The report highlighted that several low-income developing countries, including Nigeria, have returned to international markets to refinance maturing debt, but cautioned against the potential risks.
Overall, the IMF projected improvements in fiscal balances in sub-Saharan Africa, with primary deficits expected to decline further in low-income developing countries to 1.5 percent of GDP on average in 2024, gradually falling to 1 percent by 2029. This improvement is attributed to measures aimed at increasing revenues and reducing expenditures in many economies within this group.
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