The International Monetary Fund (IMF) has advised Nigeria to prioritise debt sustainability over choosing between external and domestic borrowing, as the country navigates mounting fiscal pressures and global economic uncertainty.
Speaking during a media briefing on the IMF’s April 2026 Regional Economic Outlook for Sub-Saharan Africa, Abebe Aemro Selassie emphasised that the key issue for Nigeria is not the source of borrowing, but whether its debt remains within manageable and sustainable limits.
According to him, decisions around borrowing—whether external or domestic—should be guided by the country’s ability to service its obligations without placing undue strain on public finances.
He noted that maintaining a balance between debt levels and repayment capacity is far more critical than favouring one borrowing option over another.
“What is really important is to keep the level of debt as manageable as possible, relative to debt service capacity,” Selassie said.
Nigeria’s rising debt profile has become a growing concern. Data from the Debt Management Office (DMO) shows that the country’s total public debt climbed to N159.28 trillion as of December 31, 2025.
This increase has been largely driven by domestic borrowing, as the government continues to finance budget deficits and infrastructure needs.
Despite these rising figures, the IMF expressed confidence in Nigeria’s institutional framework for managing debt.
Selassie described the country’s debt office as “fantastic,” noting that it possesses the technical capacity to navigate complex borrowing decisions and implement effective strategies.
He also highlighted the importance of liability management operations as a tool for easing debt pressures.
By restructuring existing obligations and extending repayment timelines, governments can reduce short-term servicing burdens and improve fiscal stability over time.
“And second, to do liability management operations that would make sure you extend maturities,” he added.
The IMF’s position comes at a time of heightened global uncertainty, driven in part by geopolitical tensions in the Middle East, tightening financial conditions, and rising borrowing costs.
These factors have made it more challenging for developing countries like Nigeria to access affordable financing, whether from international markets or domestic sources.
In response to these pressures, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, Wale Edun, recently called on the IMF and the World Bank to reduce borrowing costs for developing economies.
He argued that high interest rates and limited access to concessional funding are worsening debt vulnerabilities across emerging markets.
20m Africans face food crisis
Meanwhile, the fund has warned that more than 20 million people across sub-Saharan Africa could face “moderate or severe food insecurity due to rising global prices.”
The warning was contained in the IMF’s April 2026 Regional Economic Outlook titled “Hard-Won Gains Under Pressure.”
The report examined recent growth trends in the region and the emerging risks from global commodity shocks and geopolitical tensions.
The Fund noted that while sub-Saharan Africa entered 2026 with relatively strong economic momentum, external pressures are now threatening those gains.
It highlighted rising inflation risks, weakening trade conditions, and tightening financial markets as key challenges facing the region.
Similarly, it has been observed that the crisis in the Middle East is impacting global economies, with growth in African countries forecast to decline by up to 0.2 percent.
This was contained in a joint policy document presented in Washington, D.C., by the African Union Commission, the African Development Bank Group (AfDB), the United Nations Economic Commission for Africa (ECA), and the United Nations Development Programme (UNDP).
The report, entitled “Impacts of the Conflict in the Middle East on African Economies,” warns that African economies, which were slowly recovering from the severe consequences of COVID-19, the Russia–Ukraine war, and rising trade tariffs, could be among the most affected by the ongoing conflicts in the Middle East.
Kevin Urama, Chief Economist and Vice President for Economic Governance and Knowledge Management at AfDB, presented the report on the sidelines of the Spring Meetings of the International Monetary Fund and the World Bank.
He noted that the closure of the Strait of Hormuz had significant consequences for transport and trade.
“The report reminds us that the continent demonstrates remarkable resilience,” said Francisca Tatchouop Belobe, African Union Commissioner for Economic Affairs, Development, Trade, Tourism, Industry, and Mining.
To address the crisis, AfDB Chief Economist Urama urged African governments not to panic or take hasty decisions that could harm their fiscal balances.
The report recommends, in particular, strategic inflation management to ensure short-term price stability expectations. It cautions oil-exporting countries to adopt strict fiscal discipline by managing windfall revenues prudently, while strengthening debt-monitoring, and using energy reserves strategically. Where fiscal space allows, it advises that temporary and targeted social protection measures be deployed to shield the most vulnerable populations from the crisis.
However, the report urged governments to avoid broad-based subsidies that could worsen long-term fiscal deficits, and to diversify sources of energy, inputs, and food supplies.