How IMF Debt Servicing is Consuming the National Budget

Against the backdrop of intensifying fiscal pressure on Nigeria, fresh data from the International Monetary Fund (IMF) puts Nigeria’s high level of foreign debt into harsh focus. According to the latest update from the IMF, as of 30 April 2025, Nigeria still has a total charge and interest payment of SDR125. 99 million (Special Drawing Rights). N274, 66 billion of Naria, at the rate of N2,180 to 1 SDR, as provided by the XE currency platform.

This liability emerged from the SDR2.454 billion loan that the IMF footed to Nigeria in April 2020 as a bailout. In light of the relativity of the local currencies, this demonstrates the residual achievements of international borrowing. Even though Nigeria has been able to kick off and maintain its main repayments since 2023, the pressure of interest and charges in Nigeria’s fiscal environment is overwhelming.

Taken together, the effect of depreciating Naira, increasing debt servicing commitments and the country’s constant revenue constraints paints a grim picture. From foreign exchange loss alone, the total liability to the IMF of Nigeria increased by N2.5 trillion across the CBN’s financial year report of 2024. This means that by the end of 2024, an original N2.5 trillion from 2023 was earlier doubled to N5 trillion just on account of Naira devaluation. The implication is sobering: even when a country pays its foreign debt, a depreciating currency may increase the cost of debt servicing domestically, thereby misdirecting fiscal planning and crowding out development expenditure.

 

Understanding Special Drawing Rights and IMF Debt Obligations

Special Drawing Right (SDR), being the international reserve asset created by the IMF to supplement the official reserves of member countries, is being created. SDRS are not currency in the classic sense, but they are a title on the IMF’s holdings in countries that are IMF members. Pegged to five of the major international currencies, the Value of the SDR is calculated. U.S. dollar, euro, Chinese yuan, Japanese yen and British pound.

In its case, Nigeria accessed an SDR2.454 billion loan from the IMF in April 2020, and this was used to cushion the economic impact of the COVID-19 pandemic. However, every SDR issued incurs a liability to pay interest and finally pay back the principal, in a currency whose value in the market over time oscillates. This has led to monetary instability in financial planning, especially for nations such as Nigeria that have weak currencies that are also usually depreciated.

 

Timeline of Nigeria’s IMF Loan Repayment and Interest Charges

For the IMF loan from 2020 to 2022, Nigeria paid only charges and interest. These included:

- SDR13.22 million in 2020

- SDR25.88 million in 2021

- SDR25.89 million in 2022

The repayment of the principal started in the year 2023 when the reign resumed by President Bola Ahmed Tinubu, who also took over the reign in the same year. Nigeria repaid:

- SDR613.63 million in 2023

- SDR1.227 billion in 2024

- SDR613.63 million due in 2025

Although the IMF is on schedule for the principal repayments, accumulated charges and interests are still building. The IMF is predicting the following payments for the future years:

- SDR22.35 million in 2025

- SDR25.91 million in 2026

- SDR25.91 million in 2027

- SDR25.92 million in 2028

- SDR25.90 million in 2029

The projections totalled as SDR125.99 million or the equivalent of N274.66 billion in domestic currency. From the IMF reporting, these are under “overdue obligations and projected payment funds ”, making it clear that Nigeria still owes despite coming into repayment of the principal amount.

 

Impact of Depreciation of Naira on Payments of Debts to the IMF

The Central Bank of Nigeria's 2024 financial statement offers a useful window for understanding the deepening of Nigeria’s debt servicing crisis caused by volatility in the exchange rate. Even as Nigeria’s IMF debt value remained dollar-wise, the Naira depreciation doubled the debt burden locally from N2.5 trillion to N5 trillion.

This means that even if the federal government had adequately serviced its debt in dollar or SDR terms (or assumed that it did so), the loan book-to-treasury book price has grown significantly in Naira terms. These are more than book-keeping issues. They are real fiscal pressure which requires ramped-up budgetary allocations, which in turn will see reduced expenditure on essential sectors such as health, education and infrastructure.

 

This is an elaborate chart of Nigeria’s IMF loan repayment and interest charges from 2020-2029. It illustrates the move from solely P&I interest in (2020-2022) to major P&I principal repayment beginning in 2023, with the continued payment of interest thereafter through 2029.

 

Nigeria's Debt Servicing Crisis: The Numbers Speak

According to Nigeria’s Economic Report for January 2025, Nigeria paid N696 billion on January’s debt servicing. When coupled with the N696 billion payment for December 2024 and combined with the two months’ payments, the total was N1.3 trillion, way above the budgeted monthly amount of N689 billion.

What was more frightening was that, according to the CBN’s economic report of January 2025, zero naira had been provided for capital expenditure in that month. This signals a dangerous trend: the obsession with debt repayment that the nation is developing is strangling the kind of investment that would see the economy grow and living standards increase.

 

Tinubu Administration and Nigeria’s IMF Debt Management

The Tinubu administration has been managing the payment of IMF debts during an era of greater fiscal pressure since it took office in 2023. While the administration has succeeded in meeting the requirements of principal repayments, the question of the sustainability of such an approach is raised. The government’s manoeuvrability is tightening increasingly because of rising volumes of interest payable and the depreciation of local currency.

Nigeria’s debt management strategy is, according to critics, reactive in nature and too inclined towards borrowing in the short term without focused long-term revenue creation. The consequences are evident: higher debt servicing costs, lower public investment and a disintegration of confidence in the economic future of the nation.

 

General Implications of Economic Policy and Fiscal Planning.

A direct response to pay to settle IMF loans with a depreciating Naira is a straight-up confirmation of why Nigeria needs a robust economic strategy. To avoid another debt servicing crisis, policymakers need to be concerned with:

1. Exchange Rate Stability: The correction of the naira is essential in reducing the impact of foreign-denominated debt on public finances.

2. Revenue Expansion: The reforms of Taxes and diversified exports are critical in raising the resilience of the public finances by expanding non-oil revenues.

3. Prudent Borrowing: Future borrowing is to be attached to projects with quantifiable returns for debt sustainability.

4. Expenditure Reform: Such a rationalization of recurrent expenditures could then release resources that can be made available for capital projects, especially under the infrastructure and social sectors.

 

Conclusion

Nigeria’s IMF burden of debt is not just about unpaid loans; it is a sign of more deep-seated economic weakness, as a result of weak currency performance, limited fiscal buffers and over-reliance on external borrowing. It's praiseworthy that the Tinubu administration has not slowed down on its urge to repay principal, but the SDR125.99 million in interest and charges are a steep liability.

The broader lesson is unmistakable: a weak local currency further increases the excessively high cost of foreign debt beyond the abnormally high levels of repayment of principal debt. Nigeria’s Naira depreciation and IMF debt are the story of the hidden costs of international borrowing for other emerging economies.

Nigeria's IMF loan repayments and IMF charges, as well as the intensifying debt servicing crisis Nigeria finds itself make difficult but necessary choices. Fiscal discipline, smarter borrowing, and structural reforms are not something you can choose – they are necessary to avoid the distraction of a trade-off between the comfort of a quick-fix stability and the future of the nation.

Finally, Nigeria has to pivot from servicing debt to a strategy of reducing debt, saving its economy and regaining public confidence if the government is to lead the country towards sustainable well-being.