The International Monetary Fund (IMF) has said Nigeria’s debt level is “moderate and not high risk” and not capable of pushing the country into a debt trap.
IMF’s First Deputy Managing Director, Gita Gopinath, made this known during a meeting with Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, in his office in Abuja.
According to a report by THISDAY, during an interview with Gopinath, she acknowledged the economic challenges currently facing Nigeria and underscored the need for the federal government to embrace targeted social interventions.
Nigeria’s total public debt rose to N142.3 trillion as of September 30, 2024, compared to N134.3 trillion in June 2024, following exchange rate devaluation.
Data from the Debt Management Office (DMO) shows that external debt in dollar terms increased marginally from $42.90 billion in June to $43.03 billion in September in naira terms, while external debt rose by 9.22 per cent, from N63.07 trillion to N68.89 trillion in the comparable period.
Responding to a question on how sustainable the country’s debt level was, Gopinath said, “We (IMF) assess debt sustainability for countries every year and we did this for Nigeria in our report for 2024. Our assessment was that the risk of sovereign stress for Nigeria is moderate and not high risk.”
When asked if at moderate debt level, it meant the country had enough room to take more debts, Gopinath said, “No, I will not go that path.”
Continuing, she said: “The point is that you want to stay moderate and you don’t want to move into a high-risk debt level.
“But I just want to highlight the fact that while the country’s sovereign debt is said to be moderate, we are living in a world with a lot of shocks and large amount of uncertainty.”
Gopinath further stated: “And if you look at the interest payment as a share of revenues, that is 75 per cent of revenues go into interest payment. That means there is hardly any money for doing social support or development spending.
“Therefore, to make sure that debt stays in a manageable level, it is also important to do more domestic revenue mobilisation, which is to be able to raise more revenue.
“That is going to be very helpful in meeting other needs of the society. Also, all other macro-adjustments that are necessary to bring down inflation would over time help in reducing interest payment. So, Nigeria’s debt is a moderate risk, but it is important to stay the course in terms of sound policies and also pro-growth policies because that is very helpful from a debt perspective.”
Commenting on the multilateral institution’s recommendations for Nigeria to ramp up domestic revenue, the IMF official pointed out that the significant savings from ending fuel subsidies should be re-channelled into the government’s coffers so that it could be used for important development spending. This, according to her, would raise revenues for the government.
Gopinath said the second step is in terms of improving administration, pointing out that more can be done on that front and the government needs to invest in automation and digitalisation to make that happen, adding that there also tends to be a lot of tax exemptions and tax expenditure.
“Closing those loopholes would also help to raise tax revenues. More generally, putting policies in place, like improving security, power, infrastructure, ease of doing business, which the government has done with the recent national single window to help importers and importers.
“Those kinds of measures would bring back investment and growth and that would also be helpful,” she added.
The IMF chief also advised the monetary policymakers to keep monetary policy tight, saying this is necessary to help bring inflation down and stabilise the naira exchange rate.
“The central bank has also done a good job in terms of fixing the forex market and functioning of the market to prevent big and unnecessary volatile moves.
“So, making sure that the forex market continues to work efficiently is going to be important. It is not just about monetary policy; it also depends on fiscal policy.
“Fiscal policy also needs to be in line with bringing inflation down. Containing deficits is going to be important and making sure that you don’t go back to when central banks were financing fiscal deficits because that obviously would be detrimental to the naira.
“So, these set of measures, staying the pack and letting the currency be a shock absorber and not doing too much interventions, are very important to keep confidence in the currency,” she added.
The finance minister also outlined Nigeria’s effort to enhance social investment programmes, stating that the government is transitioning to a biometric-based transparent system to improve efficiency and accountability.
He stated that the government was also advancing tax reforms, revenue assurance mechanisms, and digitalisation to strengthen domestic resource mobilisation.
Additionally, he said crude oil production had increased from 1.2 million to 1.7–1.8 million barrels per day, significantly boosting national revenue.
