The International Monetary Fund (IMF) predicts that Nigeria’s current debt-to-gross domestic product (GDP) ratio of 50.7% will decline by 2025.
The debt-to-GDP ratio is a measure that compares a country’s public debt to its GDP and indicates a country’s ability to repay its debt by comparing the amount it owes and what it produces.
The higher the debt-to-GDP ratio, the less likely a country is to repay its debts and the higher the risk of default.
According to the IMF’s Fiscal Monitor Report on Thursday, Nigeria’s debt-to-GDP figure is expected to decline slightly to 49.6% next year.
The report also showed that Nigeria’s debt-to-GDP ratio was 46.1% in October 2023, but one year later it is now 50.7%.
The IMF said the country’s debt includes overdrafts from the Central Bank of Nigeria (CBN) and debts from the Asset Management Corporation of Nigeria (AMCON).
“The Central Bank of Nigeria’s overdrafts and government deposits have almost offset each other, and the Nigeria Asset Management Corporation’s debt has been roughly halved,” the IMF said.
The financial institution further estimated that Nigeria’s debt-to-GDP ratio will further decline to 48.5% in 2026 and 48.2% in 2027. It then rose to 48.8 percent and 49.1 percent in 2028 and 2029, respectively.
“Nigeria’s debt quagmire”
Under the current administration, Nigeria’s total public debt has increased from N87.38 trillion as of June 2023 to N121.67 trillion as of March.
On June 20, the Debt Management Office (DMO) announced that Nigeria’s public debt would rise to N121.67 trillion in the first quarter of 2024 (Q1), compared to N97 trillion recorded in December 2023. announced that it has increased to 1 billion Niger.
The DMO said this increase was mainly due to new domestic borrowing by the federal government to finance part of the 2024 budget deficit and spending by multilateral and bilateral financial institutions.
According to the breakdown of public debt by DMO, domestic debt was 65.65 trillion naira ($46.29 billion) and external debt was 56.2 trillion naira ($42.12 billion).
According to the Federation Budget Office in July, the country’s debt-to-GDP ratio standard for 2023 was 25%, compared to the international standard for comparable countries of 56%.
However, the Budget Office announced that Nigeria’s debt-to-GDP ratio from the first quarter (Q1) to the third quarter (Q3) of 2023 was 44.1%, exceeding the federal government benchmark.
“World debt exceeds $100 trillion”
The IMF said global public debt is extremely high and is expected to exceed $100 trillion, equivalent to about 93% of global GDP, by the end of the year.
The lender said debt “will approach 100% of GDP by 2030.”
“This is 10 percentage points of GDP above what it was in 2019, or before the pandemic,” the IMF said.
“The situation is not homogeneous, with public debt expected to stabilize or decline in two-thirds of countries, but the October 2024 Fiscal Monitor warns that future debt levels could be even higher than predicted. This indicates that there is a high probability that the impact can be stabilized or mitigated, indicating that fiscal adjustments are needed more significantly than currently projected. ”
The 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 easing cycle.
