Nigeria’s debt servicing costs have dropped significantly, with figures from the Central Bank of Nigeria (CBN) showing a decline from $540 million in January to $276 million in February. This reduction comes as the Federal Government works to restructure its debt, improve dollar liquidity, and ease pressure on the foreign exchange market.
Despite mounting concerns over Nigeria’s growing debt, the International Monetary Fund (IMF) has given it a positive rating. According to Gita Gopinath, IMF’s First Deputy Managing Director, Nigeria’s debt is not yet at a crisis level. However, she cautioned that this does not mean the government should take on more debt recklessly.
At 52.8% of GDP, Nigeria’s debt remains within what the IMF considers a manageable range. However, it is uncomfortably close to the World Bank’s 55% threshold for developing countries, which marks the danger zone. Some experts are skeptical of the IMF’s optimism, fearing that Nigeria could be heading toward unsustainable debt levels.
Meanwhile, Nigeria’s Letters of Credit have increased, suggesting a rise in trade financing. The CBN has maintained its stance on stabilizing the naira rather than artificially propping it up. However, the currency’s lower value continues to affect essential goods and services, including fuel prices, electricity tariffs, and transportation costs—all while wages remain stagnant.
Recent data from the Debt Management Office (DMO) shows that Nigeria now allocates N6.04 trillion (about 69% of its revenue) to debt restructuring, up from 3.58% in early 2023. Although oil production has improved in recent weeks, it still falls short of what is needed to meet the country’s financial obligations.
Gopinath also highlighted a major concern—the federal government’s spending habits. While economic reforms have made Nigeria more attractive to foreign investors, they have also driven nearly 100 million people into poverty. Some independent assessments put the number even higher, at around 140 million. The IMF attributes this to Nigeria’s lack of a social security system, which leaves unemployed citizens without a safety net.
In short, while Nigeria’s debt situation is not yet a crisis, the warning signs are there. The IMF’s positive rating is not a free pass for more borrowing, and experts urge the government to focus on responsible financial management to avoid a potential debt trap.
