The International Monetary Fund (IMF), projected that by 2022 Nigeria would spend almost 92 kobo of every Naira it earned on servicing its growing debt.

This implies that only 8kobo of every Naira earned will be used for development. According to the IMF’s Article IV consultation report, interest payments on the federal government’s debt will increase by 92 percent by 2022 from 85,5 percent in 2021. Accordingly, the ratio of debt service to government revenue was 76% at the end of September 2021, meaning that 76 kobo of every N1 earned by the government in 2021 were spent on debt service. The IMF estimates that debt service will account for 29.8% and 32.8% of consolidated revenue (government revenues plus its agencies’ revenues) in 2021 and 2022 respectively.

The IMF reported that its projections were based on estimates by Nigerian authorities as well as staff estimates. IMF’s ‘Nigeria Federal Government Operations, 2017–26,’ says the federal government’s debt is expected to grow to N70.85 trillion for 2022, then N83.17 trillion for 2023, N97.80 trillion for 2024, N115.38 trillion for 2025, and N136.11 trillion for 2026.

IMF estimates that the country’s revenues and grants will total 7% of its total output this year. Growth last year was estimated at 7.4%, considerably higher than the 6.3% for 2020. A combination of government support, rising oil prices, and international financial aid has helped Nigeria’s economy rebound from a recession. In response to the COVID-19 crisis, Nigeria’s public debt increased dramatically in 2019. According to the IMF; “The public debt has increased steadily over the past decade, reaching 29 percent of GDP in 2019 from 9% in 2009, driven by primary deficits as weak non-oil revenue mobilisation failed to compensate for falling oil revenue.”

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“In 2020, the sharp decline in oil revenues increased public debt further to 35 per cent of GDP. The debt-to-GDP ratio is expected to increase in the medium term to 43 per cent of GDP, despite favourable growth-interest rate dynamics. Gross financing needs are expected to increase to 8.9 per cent of GDP in 2021 from 7.3% in 2020, and to 11.4% in the medium term.”

According to the IMF, although interest payments account for only 2% of GDP, they accounted for 89 per cent of the Federal Government’s income, indicating insufficient potential for domestic revenue generation. The government’s interest-to-revenue ratio is likely to drop somewhat to roughly 86 percent in 2021 before rising to 139 percent by 2026, according to the report.