We’re Not Calling for Immediate Tax Hike, IMF Clarifies, Says Nigeria’s Debt Sustainable

The International Monetary Fund (IMF) has clarified that it is not calling for an immediate increase in taxes in Nigeria, stressing that any future tax measures must be accompanied by improvements in social protection, public services and living standards, even as it declared the country’s debt sustainable and the risk of debt distress moderate.

Speaking on Arise News while discussing the Fund’s latest Article IV assessment of Nigeria’s economy, IMF Resident Representative for Nigeria, Dr Christian Ebeke, said the IMF’s fiscal recommendations have been widely misunderstood, insisting that the Fund is advocating a balanced approach that protects vulnerable Nigerians while strengthening government revenues.

“Our fiscal recommendation is actually balanced in the sense that we are not calling for an immediate increase in taxes. We are saying these increases in taxes should go hand in hand with progress you make in terms of reaching out to the most vulnerable and reaching out to the ordinary Nigerian and improving their living standards,” Ebeke said.

The clarification comes amid growing public concerns that the IMF’s reform prescriptions for Nigeria are centred on higher taxes and subsidy removals without adequate consideration for the welfare of citizens.

While dismissing calls for immediate tax hikes, the IMF official maintained that Nigeria would need to raise more domestic revenue over the medium term to finance its development priorities, particularly as foreign development assistance continues to decline. “Nigeria needs to raise more domestic revenue,” he said.

Meanwhile, Ebeke, reassured investors and policymakers that Nigeria’s debt position remains sustainable despite concerns over rising debt service obligations.

Warning that the country’s growing interest payment burden is consuming more than half of government revenues and limiting spending on critical sectors such as health, education, security and social protection, he said “Our latest assessment in the Article IV that we just published on June 9 basically concludes that Nigeria debt is sustainable, first and second, the risk of sovereign stress is actually moderate. So, we don’t see Nigeria as a higher-risk debt distressed country. Actually, the risk is moderate,” he stated.

Reiterating that while Nigeria’s debt metrics remain favourable relative to many peers, revenue mobilisation remains the country’s biggest fiscal challenge. According to him, the IMF’s latest assessment concluded that Nigeria’s debt remains sustainable despite concerns raised over rising debt service obligations and projections showing interest payments consuming an increasing share of government revenue over the coming years.

Ebeke explained that Nigeria’s debt-to-GDP ratio remains relatively low compared to many emerging and developing economies, while the composition and maturity structure of the debt stock also provide important buffers against refinancing risks.

He added: “First, is that the debt-to-GDP ratio that you just showed is still very low in the 30s compared to many other countries. Nigeria has a very low debt-to-GDP ratio. Second is the composition of that debt, right? You have a good balance between domestic and foreign debt, so that also is a good edging factor for Nigeria. And third, you also have the maturity profile. This debt is actually mostly long term rather than very short term, so that also helps Nigeria in terms of rollover risk and refinancing needs.”

He further noted that a significant portion of Nigeria’s external debt consists of concessional loans rather than expensive commercial borrowings.

However, the IMF official warned that the country’s debt service burden remains a major concern, particularly as interest payments continue to consume a substantial portion of government revenues.

According to him, “Nigeria debt is sustainable, the risk is moderate, but Nigeria faces a very strong challenge in terms of interest-to-revenue ratio.”

He disclosed that IMF projections show that between 2025 and 2028, approximately half of federal government revenues could be devoted to servicing interest obligations.

“So, we actually estimate that in 2025 to 2028, you know, the interest-to-revenue ratio, so how much federal government pays out of the tax it collects is actually about 50 per cent.

“So when you have more than 50 per cent of your tax collection devoted to repay interest on your federal government debt, it leaves you very little room to actually pay for health, education, cash transfer, including security.”