Nigeria’s public external debt could increase by more than $20 billion over the next two years, reaching $72.6 billion by 2027, according to the latest projections released by the International Monetary Fund (IMF).
The forecast was contained in the IMF’s 2026 Article IV Consultation Report on Nigeria, which highlighted mounting fiscal pressures despite recent gains in macroeconomic stability.
According to the report, public external debt is expected to rise from $51.9 billion in 2025 to $66.5 billion in 2026 before climbing further to $72.6 billion in 2027, the year Nigeria is scheduled to hold its next presidential election.
The projected increase of approximately $20.7 billion represents a 39.9 per cent jump within two years and reflects concerns about the country’s growing debt obligations.
The IMF noted that spending pressures linked to poverty, food insecurity, and election-related activities could place additional strain on government finances.
“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.
Debt Stock Expected to Expand
The IMF’s projections closely mirror figures released by the Debt Management Office, which showed Nigeria’s public external debt stood at $51.86 billion as of December 31, 2025.
Beyond public sector obligations, the Fund also expects Nigeria’s total external debt stock—which includes both public and private sector borrowing—to continue expanding.
According to the report, total external debt is projected to increase from $109.3 billion in 2025 to $119.3 billion in 2026 before reaching $132 billion in 2027.
This would represent an increase of $22.7 billion over the period, with $12.7 billion of that rise expected in 2027 alone.
The report further indicated that debt indicators would remain elevated relative to economic output and export earnings.
Public external debt is projected to rise from 17.9 per cent of GDP in 2025 to 18.7 per cent by 2027. Relative to exports of goods and services, the ratio is expected to increase from 82.9 per cent to 104.3 per cent over the same period.
Debt Servicing Costs Remain High
The IMF also warned that debt servicing obligations could continue to place pressure on government finances.
Public external debt service payments are projected to increase from 8.1 per cent of exports in 2025 to 8.8 per cent in 2027, following a temporary decline to 5.0 per cent in 2026.
Interest payments on public debt are expected to rise from $2 billion in 2025 to $3 billion by 2027.
At the federal level, debt servicing is projected to consume more than half of government revenue throughout the forecast period.
According to IMF estimates, interest payments accounted for 53.2 per cent of Federal Government revenue in 2025 and are expected to rise slightly to 53.7 per cent in 2026 before easing marginally to 52.4 per cent in 2027.
Concerns Over New Borrowing Plans
The Fund noted that external financing is expected to play a larger role in funding government deficits, particularly in 2026.
Among the financing options under consideration is a proposed $5 billion Total Return Swap arrangement with an international bank alongside another Eurobond issuance.
The IMF expressed concerns about the proposed swap structure, warning that it carries risks similar to those associated with Eurobond borrowing.
According to the Fund, the arrangement could expose the government to margin calls if the value of the naira-denominated collateral declines due to currency depreciation or higher interest rates.
“The arrangement exposes the government to margin calls if the FX value of the naira securities drops (naira depreciation, higher interest rates) and could thus give rise to political constraints on monetary or exchange rate policy,” the IMF said.
Speaking during a virtual briefing on the report, IMF Resident Representative for Nigeria, Christian Ebeke, described such financing structures as potentially opaque and risky.
“We say in the report, and our view is that the transaction and these types of structures carry risks. Usually, they are opaque. So, the terms are not always very transparent when we review these instruments across countries.”
He noted that Nigeria currently enjoys access to international capital markets and may have alternative financing options available.
“We think that Nigeria has market access. Nigeria can issue euro bonds to finance the deficit. And we also think that there are other avenues for Nigeria to raise funds, including on concessional terms,” Ebeke added.
IMF Says Debt Remains Manageable
Despite concerns about rising debt levels, the IMF maintained that Nigeria’s sovereign debt remains sustainable.
According to the Fund, public debt declined to 36.1 per cent of GDP in 2025 from 39.3 per cent in 2024, supported by stronger economic growth, naira appreciation, and improved macroeconomic stability.
“The risk of sovereign stress is assessed as moderate,” the IMF stated.
However, the report warned that weak revenue mobilisation, off-budget spending, contingent liabilities, and election-related fiscal pressures could worsen the outlook if not properly managed.
The Fund recommended stronger fiscal transparency, improved budget implementation, sustained revenue reforms, and tighter expenditure controls to maintain debt sustainability.
Growth Forecast Revised
IMF Mission Chief for Nigeria, Axel Schimmelpfennig, said reforms implemented over the last three years have strengthened the country’s economic resilience.
“One of the key messages from the report is that strong reforms over the past three years have improved macroeconomic outcomes and improved resilience,” he said.
The IMF now projects Nigeria’s economy will expand by 4.1 per cent in 2026 and 4.3 per cent in 2027.
While positive, these forecasts are lower than earlier projections due to the economic impact of the ongoing conflict in the Middle East.
Schimmelpfennig also reiterated support for Nigeria’s flexible exchange rate framework and called for a broadly neutral fiscal stance in 2026 to help maintain macroeconomic stability and support inflation control efforts.
The Fund further urged the government to expand social safety net programmes, strengthen infrastructure development, improve electricity supply, enhance security, and continue reforms in agriculture, healthcare, and education.
Obi Criticises Borrowing, Presidency Pushes Back
Meanwhile, the presidential candidate of the Nigeria Democratic Congress, Peter Obi, criticised the Tinubu administration over what he described as excessive borrowing and poor fiscal accountability.
Obi claimed Nigeria’s total public debt had risen to approximately N200 trillion, representing an increase of more than N100 trillion within three years.
“President Bola Tinubu’s administration has engaged in remarkably imprudent borrowing, escalating Nigeria’s total debt to approximately N200tn. This represents an increase of over N100tn within a mere three years,” he said.
The former presidential candidate argued that the pace of debt accumulation raised concerns about transparency and accountability in the utilisation of borrowed funds.
However, the Presidency rejected Obi’s claims, arguing that much of the increase in Nigeria’s debt profile reflected the effects of naira depreciation rather than fresh borrowing.
Responding to Obi’s remarks, Special Assistant to the President on Social Media, Dada Olusegun, said exchange rate adjustments had significantly increased the naira value of existing foreign debt obligations.
“For the umpteenth time, Nigeria’s obvious debt portfolio increase over the past three years under the administration of President Tinubu is not a function of new borrowings rather; vast majority of them are mathematical impacts of currency devaluation which you also promised to implement during your campaigns,” Olusegun said.
He also noted that Nigeria’s public debt figures include liabilities accumulated by state governments and should not be attributed solely to the Federal Government.
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