Despite repaying IMF’s $3.4bn COVID-19 loan, Nigeria still battles N144.67trn debt

Despite repaying IMF’s $3.4bn COVID-19 loan, Nigeria still battles N144.67trn debt

Nigeria has successfully repaid its $3.4 billion COVID-19 loan to the International Monetary Fund (IMF), but it continues to struggle with a massive debt burden. As of December 2024, the country's domestic debt has reached N74.38 trillion, while its external debt stands at $44.9 billion (equivalent to N144.67 trillion). The domestic debt largely consists of Federal Government-issued instruments, with FGN bonds making up the majority at N55.44 trillion. Other components include Treasury Bills, promissory notes, and Sukuk bonds.

Externally, Nigeria's main creditors include Eurobond holders, the World Bank (IDA and IBRD), Exim Bank of China, and the African Development Bank. Although the IMF loan has been repaid, the country must still pay around $30 million annually in service charges and administrative fees until 2029.

Several factors contribute to the continued debt burden: the depreciation of the naira (now around N1,550 to the dollar), high budget deficits, and the frequent refinancing needs of short-term debt instruments. These conditions make external borrowing more expensive and risky.

Experts caution that while repaying the IMF loan is a positive development, Nigeria's overall debt sustainability remains fragile. The country faces significant debt servicing costs, especially as Eurobond maturities near and global interest rates remain high. 

To address these challenges, Nigeria needs to diversify its revenue sources beyond oil, manage public spending more effectively, and implement structural economic reforms. Properly managed debt can support growth, but mismanagement could deepen fiscal risks and economic instability.