According to The Guardian, the International Monetary Fund (IMF) has issued a fresh warning to Nigeria and other African countries regarding the risks associated with heavy reliance on domestic debt. The fund noted that excessive domestic borrowing is “crowding out” the private sector from the credit market.
The IMF’s latest report suggests that while domestic markets offer a buffer against exchange rate volatility, they are not infinite. High interest rates on government bonds are making it difficult for small and medium-sized enterprises to access affordable loans, thereby stifling organic economic growth.
The Fund recommended that Nigeria focuses more on improving its tax-to-GDP ratio rather than constantly dipping into the domestic debt pool to fund budget deficits.
Premium Times and BusinessDay have also amplified this warning. Premium Times reported that “IMF flags risks in Africa’s domestic borrowing,” while BusinessDay quoted an analyst saying, “the government is essentially competing with its own citizens for capital.”
Echotitbits take: Nigeria’s domestic debt has risen sharply as external markets became too expensive. The IMF’s warning is a nudge toward fiscal discipline—specifically, the government needs to spend less or tax more efficiently to avoid a local credit crunch.
Source: Reuters – https://www.reuters.com/world/africa/imf-highlights-risks-domestic-borrowing-sub-saharan-africa-2025-10-16/, March 16, 2026
Photo credit: Reuters
