• Elumelu: Local capital mobilisation solution to Africa’s infrastructure funding crisis
• Oyedele unveils reforms, says Nigerians abroad to enjoy tax holidays, incentives
The International Monetary Fund (IMF) has cautioned Nigeria against undue reliance on the domestic debt market, saying it would increase financial stability risks.
In the same vein, the IMF warned that Nigeria’s overdependence on oil remains one of the biggest structural weaknesses of its economy, urging the government to intensify efforts toward diversification, fiscal reforms, and more sustainable revenue mobilisation.
But the Chairman of UBA Group, Tony Elumelu, at a different session at the ongoing World Bank/IMF Annual Meetings, said local fund mobilisation was the solution to bridging the huge gap in the African infrastructure space.
At the unveiling of the UBA white Paper, ‘Banking on Africa’s Future: Unlocking Capital and Partnerships for Sustainable Growth’, Elumelu said there is a huge prospect in the domestic market to fund critical infrastructure, such as power, to give a fair chance to the youth to develop their capacity for wealth creation.
The ex-banker said the continent could mobilise over $4 trillion from within to power economic growth and deliver on the potential of the African economy to drive development.
Presenting the white paper, Dr Marlous van Waijenburg of Harvard Business School, said Africa has no capital scarcity but a financial intermediation challenge. The IMF warning comes against the country’s rising dependence on the local market for fiscal deficit funding since President Bola Tinubu assumed office.
The Fund, however, hailed the ongoing economic reforms, saying it would continue to strengthen the country’s growth outlook and macroeconomic resilience.
The IMF, in its Regional Economic Outlook for Sub-Saharan Africa, released on Thursday, said governments across the region, including Nigeria, are increasingly turning to local banks to finance their expenditures, a development that is deepening the “bank-sovereign nexus” and financial system risks.
The institution, in the report, warned that while domestic borrowing has provided short-term relief amid global tightening, it “has not proved a panacea,” with elevated local interest rates, fragile banking sectors and rising fiscal pressure threatening to undermine the recent reform gains.
Director of the IMF African Department, Abebe Aemro Selassie, noted: “Our countries have been able to turn to domestic banks to sustain spending levels and economies. That has been a source of resilience, but we’re now sitting in a situation where there are significant vulnerabilities, particularly in those countries where public debt is high and interest rates are high. We are seeing some pressures on bank balance sheets.”
The director observed that interest payments in Nigeria have risen to above 30 per cent of government revenues, which is among the highest in the region. The trend, he said, is crowding out the private sector and limiting fiscal flexibility.
He also noted that the cost of new domestic borrowing in Nigeria is now higher than external borrowing, with local debt increasingly financed through the banking system. This, he warned, could trigger a vicious cycle of sovereign credit crisis, weaken balance sheets, and tighten credit to the private sector.
Despite the concerns, the IMF acknowledged that Nigeria’s macroeconomic reforms, particularly exchange rate unification, tighter monetary policy and fiscal consolidation, are yielding measurable results. It said these reforms have supported investor confidence and lifted the growth outlook for 2025.
“Sub-Saharan Africa’s economic growth is expected to hold steady at 4.1 percent this year, with a modest pickup in 2026. This reflects ongoing progress in macroeconomic stabilization and reform efforts across major economies, including Nigeria,” Selassie explained.
He cautioned that Nigeria remains exposed to external repayment pressures, with $2.3 billion in Eurobond maturities due in 2025, one of the largest in sub-Saharan Africa.
Tinubu had recently requested legislative backing for a fresh loan, part of which was to be channeled to refinancing maturing debt.
The Guardian had reported that the Federal Government has not funded the sinking fund account, a buffer created to fund the liquidation of maturing facilities.
The IMF chief urged the government to deepen debt transparency and strengthen public financial management to reduce refinancing risks and borrowing costs. He further noted that while Nigeria has made notable progress in policy reforms, the country’s economic fundamentals remain highly vulnerable to fluctuations in global oil prices.
“Perhaps the most overriding challenge that the country faces is extreme reliance on oil. Oil resources have been problematic for Nigeria, as you know. Many ministers, including Minister Wale Edun, have emphasized this for years. I think the focus that the government has put in place in recent years is the right one, but there’s still a lot more to do.”
Selassie commended the Nigerian government for its recent policy moves, particularly on the monetary front, saying that the reforms undertaken over the past year are beginning to reflect positively in the economy. He, however, stressed that further policy calibration and discipline are needed to achieve the government’s inflation and growth targets.
Selassie noted that while inflation has begun to slow in Nigeria and other parts of the region, the cost-of-living crisis continues to exert pressure on households, especially those with limited income and savings capacity.
He warned that about 20 countries on the continent are either at high risk of, or already facing debt distress. He said the high debt levels, coupled with persistent inflation and weak revenue mobilisation, pose significant threats to economic stability and growth prospects in the region.
According to him, 14 African countries are currently classified as being at high risk of debt distress, while six others are already in debt distress, underscoring the urgent need for fiscal reforms and stronger economic management frameworks.
Meanwhile, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has assured global investors that Nigeria’s sweeping tax overhauls are fundamentally designed to reduce business risk, simplify compliance, and ensure a fairer fiscal environment.
Speaking on the sidelines of the World Bank/IMF Annual Meetings in Washington, D.C., Oyedele stated that the reforms were not merely a revenue-generation exercise, but a crucial structural adjustment aimed at boosting investor confidence and promoting inclusive growth.
Speaking with newsmen yesterday, Oyedele highlighted that the current system’s complexity and multiplicity of levies have historically created uncertainty, driving up the cost of doing business, a critical barrier the new policies are engineered to dismantle.
Key elements of the reform package presented to international finance and investment leaders include consolidating Nigeria’s dozens of taxes into a streamlined structure, leveraging technology for automated compliance, and shifting the tax burden away from low-income earners and small businesses.
“We have about 60 different taxes; we are going to repeal and replace obsolete tax laws,” Oyedele stated, emphasising that the reduction in the number of taxes is aimed at providing clarity and predictability for investors operating in the Nigerian market.
He stressed that the reform agenda seeks to make tax compliance frictionless for businesses while broadening the tax base to capture sectors and individuals previously operating outside the net.
The core principle guiding the committee’s work, Oyedele explained, is a move toward a progressive system where the affluent contribute a proportionally higher share, while vulnerable populations are protected.
In another forum, Oyedele assured Nigerians in the Diaspora that the Federal Government’s ongoing Fiscal Policy and Tax Reforms are designed to be protective, investor-friendly, and growth-oriented.
Speaking during a joint virtual meeting with the Chairman of the Nigerians in Diaspora Commission (NiDCOM), Dr. Abike Dabiri-Erewa, Oyedele explained that the reforms aim to promote trade surplus, balance of payments stability, unified foreign exchange rates, and harmonisation of collective taxes and levies.
The interactive session, organised for Nigerians living abroad, sought to dispel misinformation circulating in the media about the impact of the fiscal and tax reforms on the global Nigerian Diaspora community.
The NIDCOM Chairman emphasised that the Diaspora remains a strategic and major contributor to national development and therefore deserves to be fully informed about the implications of the new fiscal policy framework scheduled to commence in January 2026.
Oyedele further explained that the reforms are people-centric, growth-focused, and efficiency-driven, noting that key measures include exemptions and reductions in Withholding Tax (WHT) rates, higher exemption thresholds for small businesses, elimination of taxes on investment and capital, and rationalisation of incentives.
He added that the reforms will also ensure a reduction in the VAT burden and address other structural and fiscal constraints.
During the meeting, several concerns were raised by participants, including whether remittances sent to Nigeria would be taxed, how double taxation treaties with other countries would apply, and the implications for non-resident taxation, income taxes on Diasporas, small business operations, real estate investments, and retired Nigerians with properties at home.
Responding, Oyedele clarified that no such taxes will be applied to Diaspora remittances or investments, assuring participants that Nigeria remains an attractive destination for investment and business opportunities.
