The International Monetary Fund has projected that Nigeria’s public external debt will surge by $20.7bn by the year 2027, coinciding with the nation’s next election cycle.
In its 2026 Article IV Consultation report on Nigeria released on Tuesday, the global financial institution estimated that public external debt will climb from $51.9bn in 2025 to $72.6bn by 2027.
This represents an estimated 39.9 per cent increase over a two-year window, heightening ongoing anxieties regarding the country’s debt sustainability despite recent gains in macroeconomic stabilization.
With the next presidential election scheduled for January 2027, the Fund cautioned that mounting fiscal pressures tied to poverty, food insecurity, and election activities could widen the fiscal deficit and necessitate more borrowing.
The IMF report noted:
“Spending pressures from elevated poverty and food insecurity, including in the run-up to the elections, could widen fiscal deficit and increase financing needs.”
According to Balance of Payments forecasts, public external debt is on track to hit $66.5bn in 2026 before hitting the projected $72.6bn in 2027.
This trajectory matches records from the Debt Management Office, which put the country’s public external debt at $51.86bn at the end of December 2025.
When accounting for both public and private sector obligations, the IMF expects the total external debt profile to expand from $109.3bn in 2025 to $119.3bn in 2026, eventually reaching $132.0bn by 2027. This means total external debt could jump by $22.7bn over the two-year period, with $12.7bn of that increase concentrated in 2027 alone.
The metrics demonstrate that public external debt will remain high compared to the nation’s economic output and export returns. It is expected to scale from 17.9 per cent of GDP in 2025 to 18.7 per cent in 2027, while rising from 82.9 per cent of total exports to 104.3 per cent over the same timeline.
Debt servicing parameters are also expected to worsen. Public external debt servicing is projected to take up 8.8 per cent of export revenues by 2027, following a brief dip to 5.0 per cent in 2026 from 8.1 per cent in 2025. Additionally, interest payments on public debt are expected to increase from $2bn in 2025 to $3bn by 2027.
At the federal level, debt obligations will continue swallowing more than half of generated inflows. The Fund estimated that interest payments drained 53.2 per cent of Federal Government revenue in 2025, and forecasts it at 53.7 per cent in 2026 before dropping slightly to 52.4 per cent in 2027.
The report also underlined an increasing reliance on external funds to cover public spending gaps. Financing for the 2026 consolidated government deficit is heavily weighted toward foreign alternatives, including a planned $5bn total return swap with an international bank alongside a new Eurobond issue.
However, the IMF voiced concerns regarding the proposed swap structure, stating that its costs parallel Eurobond yields and could trigger margin calls if the local currency loses value.
The IMF observed:
“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.”
During a virtual press briefing on Tuesday regarding the report, the IMF Resident Representative for Nigeria, Christian Ebeke, urged caution regarding the $5bn Total Return Swap arrangement with First Abu Dhabi Bank, highlighting hidden risks despite the country’s renewed international capital market access.
Ebeke stated:
“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.
“They also carry risk, as we flag in the report: the margin calls in the case of the value of the asset drops or the currency depreciates.
“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.
“At this point, we don’t have any further information on the TRS. But our view is that it carries risk, and it’s important to monitor those risks very, very carefully.”
The warning came amid a broader analysis where the IMF acknowledged that economic reforms implemented by Nigeria over the past three years have improved macroeconomic stability and buffers against external economic adjustments.
The Fund still considers the nation’s sovereign debt situation manageable, rating the overall threat of sovereign stress as “moderate.” Public debt dropped to 36.1 per cent of GDP in 2025 from 39.3 per cent in 2024, aided by stronger economic growth, currency appreciation, and stability reforms.
However, the IMF warned that weak tax collection, unbudgeted spending, contingent liabilities, and election spending pressures could worsen the baseline. To curb borrowing, it recommended improving budget implementation, raising domestic revenues, and ending extra-budgetary disbursements.
Also speaking at the briefing, IMF Mission Chief for Nigeria, Axel Schimmelpfennig, stated that previous policy changes have cushioned the economy against the fallout of geopolitical tensions in the Middle East.
Schimmelpfennig stated:
“One of the key messages from the report is that strong reforms over the past three years have improved macroeconomic outcomes and improved resilience.
“We continue to think that the flexible exchange rate regime is serving Nigeria well, and we’ve even seen an appreciation against the US dollar since the start of the year.
“For 2026, we project real GDP growth to be 4.1 per cent. And for 2027, we see some acceleration to 4.3 per cent.”
While high global oil prices from the conflict could boost export earnings, Schimmelpfennig noted they also generate inflationary pressures via costlier food, fuel, and fertilizers.
Consequently, the IMF recommended a neutral fiscal policy for 2026 to align with the Central Bank of Nigeria’s tightening measures, noting that monetary policy must remain restrictive for longer due to fresh global price risks.
The Fund further urged the government to expand its targeted cash transfer initiative to protect vulnerable households, while maintaining investments in infrastructure, power, security, agriculture, education, and healthcare. The IMF reiterated that Nigeria continues to have one of the lowest revenue-to-GDP ratios globally, advising the country to tighten tax administration and align tax rates with regional peers over time to build development funding pools.
In a related development, Peter Obi, the 2027 presidential candidate of the Nigeria Democratic Congress, criticized the administration of President Bola Tinubu over its borrowing track record and fiscal stewardship.
Obi claimed that the country’s public debt has risen to roughly N200tn due to what he termed “imprudent governance,” pointing out that this constitutes an increase of more than N100tn in three years compared to the N49tn recorded under former President Muhammadu Buhari’s eight-year term.
In a statement shared via his official X handle on Tuesday, Obi noted:
“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, a stark contrast to the roughly N49tn accumulated during President Muhammadu Buhari’s eight-year tenure, which would have projected to around N80tn.
“As millions of Nigerians grapple with the shock of this unsustainable debt accumulation, the situation is exacerbated by the government’s reckless approach to borrowing and a profound absence of accountability and transparency in the utilisation of these funds.”
The Presidency swiftly rejected Obi’s claims that the administration added N100tn to the national debt, clarifying that the spike is primarily a mathematical outcome of currency devaluation.
Responding via social media, the Special Assistant to the President on Social Media, Dada Olusegun, stated:
“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 added that the publicized debt figures incorporate loans taken by various sub-national state governments over the years, rather than the Federal Government alone. He argued that foreign debt obligations in dollar terms have remained largely stable, and that exchange rate changes simply inflate their calculated value in local currency terms.
