The International Monetary Fund has reported that Nigeria allocates a significant portion of its revenue to debt servicing, which limits available funds for essential development projects.

During the Fiscal Monitor press briefing at the ongoing IMF/World Bank Annual Meetings in Washington, DC, the Division Chief of the IMF’s Fiscal Affairs Department, Davide Furceri, underscored the necessity for Nigeria to implement more effective revenue mobilization strategies to alleviate this financial strain.

Furceri pointed out that Nigeria’s debt service-to-revenue ratio is approximately 60 percent, which severely restricts the government’s capacity to invest in vital social and economic programs.

Although Nigeria’s debt service-to-GDP ratio has decreased from nearly 100 per cent to 60 percent, Furceri emphasized the need for the country to further reduce the proportion of revenue allocated to debt repayments.

He advocated for broadening the tax base as a key strategy to achieve this goal.

He said, “There is a need to grow the revenue-to-GDP ratio.  For a country Like Nigeria, the Debt Service-to-Revenue is about 60 per cent.  What that means is that a larger part of the revenue of the country goes into debt servicing.  What we recommend for countries like Nigeria, if they can improve their revenue mobilisation, they will be able to reduce the portion of the revenue that goes into debt servicing.

“It  is important to broaden the tax base in order to have more revenue and especially in Nigeria to put in place a system and mechanism that is transparent and efficient to assist the government in collecting more revenue.”

He urged the implementation of a transparent and efficient tax collection system, calling on the government to enhance its fiscal operations to generate increased revenue.

The IMF’s Fiscal Monitor Report, released on Thursday, projected that Nigeria’s debt-to-GDP ratio, currently at 50.7 per cent, is expected to decrease to 49.6 per cent by 2025.

The report highlighted that the country’s public debt encompasses overdrafts from the Central Bank of Nigeria as well as liabilities from the Asset Management Corporation of Nigeria.

“The overdrafts and government deposits at the Central Bank of Nigeria almost cancel each other out, and the Asset Management Corporation of Nigeria debt is roughly halved.”the report noted.

Further projections indicate that Nigeria’s debt-to-GDP ratio will decline to 48.5 percent in 2026 and 48.2 percent in 2027.

However, a slight increase is expected, with the ratio rising to 48.8 per cent in 2028 and 49.1 per cent in 2029.