IMF urges Nigeria to focus on debt sustainability, not borrowing mix

The International Monetary Fund (IMF) has declined to advise Nigeria on whether it should prioritise external or domestic borrowing, instead stressing that the country’s primary focus should be on maintaining overall debt sustainability.

The position was articulated on April 16, 2026, by Abebe Aemro Selassie, Director of the African Department at the IMF, during a media briefing on the Fund’s Regional Economic Outlook for Sub-Saharan Africa.

He was responding to a question on whether Nigeria should tilt towards foreign loans or rely more heavily on domestic borrowing amid global economic uncertainty linked to tensions in the Middle East.

Selassie said it would be difficult to prescribe a specific borrowing preference, noting that such decisions depend on a broader evaluation of a country’s debt profile and repayment capacity rather than a single financing source.

“What is really important is to keep the level of debt as manageable as possible, relative to debt service capacity,” he said.

According to him, governments should focus on ensuring that borrowing remains within levels that can be sustainably serviced without putting undue strain on public finances. He added that effective liability management strategies—such as restructuring obligations and extending repayment timelines—can help ease short-term repayment pressures.

“And second, to do liability management operations that would make sure you extend maturities,” Selassie stated.

Nigeria’s total public debt rose to N159.28 trillion as of December 31, 2025, according to figures released by the Debt Management Office (DMO). The increase reflects a steady rise in borrowing, driven largely by domestic debt issuance.

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Data from the DMO show that domestic debt climbed from N81.82 trillion in September 2025 to N84.85 trillion by December 2025, while external debt stood at N74.43 trillion, accounting for 46.73 per cent of total public debt.

Within the same period, Nigeria spent $5.21 billion on servicing its external debt in 2025, representing more than 72 per cent of the country’s total international payments, highlighting the growing burden of debt obligations.

Despite the rising debt profile, Selassie expressed confidence in Nigeria’s institutional capacity to manage its obligations, describing the country’s debt office as “fantastic” and well-equipped to navigate complex financing decisions.

“It is difficult for me to answer whether to tilt toward borrowing externally or domestically,” he reiterated, noting that the choice should ultimately be guided by sustainability considerations.

The IMF’s remarks come a day after Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Wale Edun, called on multilateral lenders to reduce borrowing costs for developing countries grappling with rising debt pressures.

Speaking on April 15 during a briefing of the Intergovernmental Group of Twenty-Four on the sidelines of the launch of the IMF’s April 2026 Global Financial Stability Report, Edun urged the IMF and the World Bank to provide additional liquidity and risk management tools to ease financing constraints.

“We would like them, especially at this time, to provide additional liquidity and risk management tools that reduce the cost of financing,” Edun said, citing economic strain linked to ongoing conflicts in the Middle East.

Across Africa, sovereign debt levels are projected to continue rising. Estimates by S&P Global Ratings indicate that long-term commercial borrowing by African governments could reach $155 billion in 2026, up from $140 billion in 2025, driven by maturing obligations and persistent fiscal financing needs.

As global financial conditions remain tight, the IMF maintained that Nigeria’s borrowing strategy should be guided not by the source of funds, but by the country’s ability to manage and service its overall debt sustainably.