Nigeria’s net debt as a percentage of GDP, or 51 percent of its total debt load, is expected to decrease by 2025, according to the International Monetary Fund (IMF).
According to the IMF, Nigeria’s debt load increased from 46.1 percent in the same period in 2023 to 50.7 percent in October 2024.
However, according to data from the IMF’s Fiscal Monitor Report, which was made public on Wednesday, the percentage will slightly decline to 49.6 percent in 2025.
Nigeria’s government is borrowing more than its economic output, as seen by the rise in its net debt as a percentage of GDP from 46.1 in 2023 to 50.7 in 2024.Â
“Ghana is in the process of restructuring its debt.” Government debt estimates are based on a pre-restructuring scenario. Liabilities of the Asset Management Corporation of Nigeria (AMCON) and overdrafts from the Central Bank of Nigeria are examples of debt. “The AMCON debt is approximately halved, and the overdrafts and government deposits at the CBN nearly cancel each other out,” the IMF analysis states.
A higher debt-to-GDP ratio may strain a nation’s financial situation. It indicates that a greater percentage of the government’s income is allocated to debt repayment, leaving less for infrastructure, healthcare, and education.
Economic instability may result if a nation’s debt becomes unmanageable. The government would encounter challenges in fulfilling its debt commitments, and investors might stop lending.
The research states that this year’s general government spending as a proportion of GDP increased to 18.1% from 13.6% in 2023.
Nigeria’s revenue as a proportion of GDP climbed from 9.4% to 13.5% in 2024 and is expected to decline to 13.2% in 2021 slightly.
According to the report, the primary balance of GDP for the general government is still at 0.9 percent and is predicted to drop to 0.3 percent by 2025. Â
As of October 2024, the country’s total balance of GDP percentage is 4.6%, down from 4.2 percent in 2023 and predicted to fall to 4.2 percent in 2025.
increasing concerns related to the world’s public debt and called on nations to act quickly on budgetary measures to prevent further economic harm.
Vitor Gaspar, director of the Fiscal Affairs Department, along with colleagues Era Dabla-Norris and Davide Furceri from the same department, spoke at a press briefing on the IMF’s Fiscal Monitor report. They emphasized the importance of addressing fiscal vulnerabilities as the world’s debt keeps rising.
“Deficits are high, and it is projected that the global public debt will increase to approximately $100 trillion this year,” Gaspar cautioned.
According to him, if current trends continue, the global debt-to-GDP ratio may surpass even the levels observed during the epidemic and approach 100 percent by the decade’s end.
Despite this gloomy picture, he acknowledged the variances between countries, stating, “In about one-third of the countries, public debt is higher and expected to grow faster than pre-pandemic levels. This includes large economies like China, the US, Brazil, and the United Kingdom, which account for over 70% of global GDP.”
A “debt at risk” methodology presented in the IMF’s Fiscal Monitor shows possible debt risks during the ensuing three years.
According to Gaspar, the analysis demonstrates that “risks to public debt projections are tilted to the upside,” which means that debt could increase more quickly than anticipated in unfavorable circumstances. He urged rapid action, emphasizing that governments’ present fiscal policies are insufficient to stabilize or lower debt levels. “Kicking the can down the road won’t do. The time to act is now.”
Gaspar did concede, though, that most economies are able to make fiscal changes, even though the global debt situation appears dangerous.
He used low unemployment and loosening monetary policy in key economies to support his claim that “the likelihood of a soft landing has increased.”
He counseled nations to prioritize governance and transparency and ensure budgetary reforms are people-centered rather than reducing public investment, which could hurt long-term growth.
In response to a query concerning Nigeria’s financial status, Furceri stated that the country has many difficulties, especially in raising money.
“Nigeria has a very low revenue-to-GDP ratio, around 10 percent,” he said, adding that, like other low-income nations, the country’s debt servicing obligations are taking up a significant amount of its revenue, typically averaging around 15 percent.
Furceri clarified, highlighting the necessity for Nigeria to expand its tax base and boost revenue mobilization, saying, “This means a large share of revenue growth is used just to finance the debt.”
Furceri also emphasized how droughts and rising food costs have affected Nigeria’s economy, urging open systems to guarantee that government aid reaches the most disadvantaged groups.
He emphasised the crucial need to strike a balance between targeted social safety nets and revenue development, particularly in nations like Nigeria that are dealing with both humanitarian and financial difficulties.
Gaspar restated the main takeaway from the IMF: “Public debt is extremely high, growing, and dangerous. The moment has come to shift towards a steady, persistent, and people-focused fiscal adjustment.”
