Nigeria’s current debt-to-gross domestic product (GDP) ratio of 50.7 per cent will begin to witness a decline in 2025.
The International Monetary Fund (IMF) made the projection in its ‘Fiscal Monitor Report,’ released on Thursday.
It said Nigeria’s debt-to-GDP figure is expected to drop slightly to 49.6 per cent next year.
Debt-to-GDP ratio is a metric that compares a country’s public debt to its GDP and indicates a country’s ability to pay back its debts by comparing what the nation owes with what it produces.
The higher the debt-to-GDP ratio, the less likely it becomes that the country will repay its debt and the higher its risk of default.
The report also showed that Nigeria’s debt-to-GDP ratio was 46.1 per cent in October 2023, a year after, it stands at 50.7 per cent.
IMF said the country’s debt includes overdrafts from the Central Bank of Nigeria (CBN) and liabilities of the Asset Management Corporation of Nigeria (AMCON).
“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.” IMF said.
The lender further estimated that Nigeria’s debt-to-GDP will further drop to 48.5 per cent in 2026, 48.2 per cent in 2027; before rising to 48.8 per cent and 49.1 per cent in 2028 and 2029, respectively.
Nigeria’s public debt stock hit N134.3 trillion ($91.3 billion) by the end of the second quarter (Q2) of 2024.
IMF said global public debt is very high and is expected to exceed $100 trillion, or about 93 per cent of global GDP by the end of the year and that the debt “will approach 100 percent of GDP by 2030”.
“This is 10 percentage points of GDP above 2019, that is, before the pandemic,” the IMF said.
“While the picture is not homogeneous—public debt is expected to stabilize or decline for two-thirds of countries—the October 2024 Fiscal Monitor shows that future debt levels could be even higher than projected, and much larger fiscal adjustments than currently projected are required to stabilize or reduce it with a high probability.”
IMF said countries should confront debt risks now with carefully designed fiscal policies that protect growth and vulnerable households while taking advantage of the monetary policy easing cycle.