The International Monetary Fund (IMF) has expressed reservations regarding Nigeria’s rising reliance on local borrowing and oil income – warning that both trends could exacerbate financial instability. System weaknesses weaken recent economic changes.
The IMF noticed in its most recent Regional Economic Outlook for Sub-Saharan Africa that Nigeria and other regional nations have more and more turned to local banks for financing fiscal deficits, exposing their financial systems to sovereign debt. Though this approach has given near-term relief, the Fund warned it has also driven up interest rates, damaged bank balance sheets, and slowed private sector credit expansion.
According to the IMF’s African Department Director, Abebe Aemro Selassie, Nigeria’s interest payments currently make up over 30 percent of government income—among the highest in Africa—thereby restricting governmental spending flexibility. He also cautioned that the price of new local borrowing has surpassed that of international loans, therefore presenting possible refinancing hazards as the nation is saddled with $2.3 billion in Eurobond maturities in 2025.
The News Chronicle learnt that the alarm sounds against Nigeria’s increasing financial stress since President Bola Tinubu’s government continues to rely mostly on local debt markets to fill budget deficits. Financial experts argue that combining this strategy with erratic oil prices opens the economy to liquidity shocks and lowers investor confidence despite recent legislative benefits.
Though it recognized Nigeria’s recent macroeconomic changes—including tighter monetary policy, fiscal tightening, and currency unification—the IMF stated that such attempts had begun to revive investor confidence and boost growth expectations. It projected 4.1 percent for Sub-Saharan Africa’s expansion in 2025, with regional resilience mostly dependent on reforms in Nigeria.
UBA Group Chairman Tony Elumelu, addressing the World Bank and IMF Annual Meetings in Washington, D.C., meanwhile underlined the necessity of Africa depending more on local capital instead of foreign borrowing. He noted that locally the continent might generate over $4 trillion to pay for projects on important infrastructure and youth empowerment.
Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, assured world investors at the same forum that Nigeria’s tax reform is still running and aims to simplify compliance, reduce business risks, and foster an equitable tax environment. He underlined that to boost investment and economic development, the changes would simplify over 60 current taxes into a more open and progressive structure.
