In its 2025 Article IV Consultation Report, the IMF stated that extreme weather events such as flooding, sea-level rise, and droughts are already weakening Nigeria’s economy and could push the country further into debt if not urgently addressed.

Lagos, Nigeria’s commercial and financial hub, is especially vulnerable. Rising sea levels could damage critical infrastructure, disrupt agricultural output, and strain public finances.

“Climate risks are now a major threat to Nigeria’s growth outlook, fiscal health, trade, and financial stability,” the report warned.

Nigeria’s public debt surged to 52.3% of GDP in 2024, up from 41.5% in 2023, driven by increased borrowing and a weakening naira. Debt servicing costs also rose to 4.1% of GDP, compared to 3.7% the previous year, according to the African Development Bank.

The IMF warned that climate-related shocks combined with sluggish growth and declining tax revenue could further widen fiscal and external financing gaps.

Although relatively small, Nigeria’s financial sector is heavily concentrated in Lagos, making it highly vulnerable to flood and climate-related risks. Such exposure could impair asset quality and threaten broader financial stability.

To avoid long-term economic damage, the IMF urged Nigeria to:

• Increase investment in climate adaptation and resilience

• Improve revenue through tax reform

• Diversify the economy beyond oil

• Integrate climate policy into national development planning

While acknowledging recent fiscal reforms, the IMF emphasized that current efforts are insufficient to shield the economy from worsening climate threats.

“Without a comprehensive strategy to address both climate and fiscal challenges, Nigeria risks undermining its long-term economic future,” the report concluded.

The Fund called on the government to take immediate, coordinated action to secure sustainable and resilient economic growth.

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In a significant move, the Federal Executive Council (FEC) last week approved a new $2.2 billion external borrowing plan under the 2024 Appropriation Act financing strategy. Finance Minister Wale Edun, in a post-FEC briefing, disclosed that the plan includes $1.7 billion from Eurobonds and $500 million from Sukuk offerings. He noted that Nigeria’s access to international capital markets signifies approval of President Bola Ahmed Tinubu’s economic policies.

This new borrowing plan is expected to push the nation’s external debt to the projected $45.1 billion mark by the year’s end. However, this decision comes amid rising debt servicing costs.

According to the Central Bank of Nigeria, the country spent $3.58 billion servicing foreign debt in the first nine months of 2024, reflecting a substantial 39.77% increase compared to $2.56 billion in the same period of 2023.

The DMO also reported in October 2024 that Nigeria’s total debt stock had climbed to N134.3 trillion by the close of June. Commenting on this trend, Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise (CPPE), expressed concerns over the swelling debt load, citing limited revenue generation and persistent infrastructural shortcomings as key challenges.

The combination of continued borrowing and increasing debt service payments raises questions about the sustainability of Nigeria’s fiscal strategy and its potential long-term impact on economic stability.

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