Nigeria to spend 4.5% more than it earns in 2025 says IMF

…Sees global debt above 95% of GDP on rising uncertainty

…Says countries must adopt gradual fiscal adjustment to restore stability

The International Monetary Fund (IMF) has projected that Nigeria’s fiscal deficit will worsen, with the government expected to spend 4.5 percent more than it earns in both 2025 and 2026.

This marks a deeper shortfall compared to 2024, when Nigeria’s General Government Overall Balance stood at -3.4 percent of GDP, according to IMF data. The deficit is projected to rise to -4.5 percent of GDP in the following two years.

General Government Overall Balance, expressed as a percent of GDP is the difference between the government’s total revenues (from taxes, oil sales, and other sources) and its total expenditures (on salaries, infrastructure, subsidies, interest payments, etc.).

According to the IMF data, Nigeria’s General Government Revenue, (Percent of GDP) is projected to decline to 14.0 in 2025 and 13.9 in 2026, from 14.4 in 2024.

General Government Revenue (Percent of GDP) measures all the money the government collects mainly from taxes, oil revenues, customs duties, and other sources as a share of the country’s economy (GDP).

A Lagos-based investment analyst noted that a persistent and widening deficit means the government will have to borrow more, increasing the national debt burden. He added that this could strain public finances, particularly if borrowing costs rise due to high interest rates or low investor confidence.

With revenue falling and deficits rising, the government will rely more on borrowing, which can drive up public debt.

As of mid-2024, Nigeria’s debt-to-GDP ratio has risen to 55 percent, a significant increase from 42.4 percent at the end of 2023. This uptick is attributed to factors such as exchange rate depreciation and increased domestic borrowing at higher interest rates.

The Washington D.C based Fund said global public debt will rise sharply in 2025, exceeding 95 percent of global GDP, driven by growing policy uncertainty, trade tensions, and increasing fiscal demands.

This marks a 2.8 percentage point jump, twice the 2024 estimate and is likely to push debt levels near 100 percent of GDP by the end of the decade, surpassing pandemic-era highs.

The IMF’s latest warning came during a press briefing on the Fiscal Monitor at the ongoing IMF/World Bank Spring Meetings in Washington D.C., where officials emphasised that without decisive policy action, global debt could rise even further. These projections are based on data from the World Economic Outlook and incorporate recent tariff announcements made between February and April 2025, which have heightened economic volatility.

IMF officials who spoke at the press briefing include Vitor Gaspar, director, Fiscal Affairs Department, Era Dabla-Norris, deputy director, Fiscal Affairs Department, Davide Furceri, division chief, Fiscal Affairs Department, and Tatiana Mossot, senior communications officer, all at the IMF.

“Amid significant policy uncertainty and an increasingly fragile global economy, the rise in debt is not only persistent, it is accelerating,” the IMF stated. The Fund noted that rising tariffs, tighter financial conditions, and geopolitical tensions are compounding risks and putting added strain on public finances.

The IMF advised countries to implement gradual and credible fiscal adjustment plans, especially those with limited fiscal space. “Countries should put their fiscal house in order by adopting prudent policies within robust frameworks. This is critical to building public confidence and reducing economic uncertainty,” the Fund said.

For low-income and developing countries, which are already facing financing difficulties, the IMF recommended staying the course on planned fiscal reforms. This includes rationalizing spending, broadening the tax base, enhancing revenue collection, and ensuring that any new expenditure is met with offsetting measures. Countries in debt distress were urged to pursue timely and coordinated debt restructuring efforts.

In a worst-case scenario, the IMF warned, global public debt could surge to 117 percent of GDP by 2027, its highest level since World War II, if growth falters and revenues decline. That would exceed current baseline projections by nearly 20 percentage points.

In addition to rising debt, the Fund highlighted that many governments will also face long-term fiscal pressures from aging populations, defense needs, and climate spending. With interest rates staying high and commodity prices increasingly volatile, many countries may find it harder to fund social programs and public investments.

Advanced economies were urged to tackle structural challenges through pension and healthcare reforms, while emerging markets and developing economies were encouraged to improve tax systems and eliminate inefficiencies. The IMF stressed that any fiscal support in response to trade shocks should be temporary, targeted, and transparent.

“Significant policy changes and heightened uncertainty have worsened the fiscal outlook,” the IMF concluded. “To build resilience and ensure sustainable growth, governments must focus on sound fiscal management, fair taxation, and wise resource allocation.”