The International Monetary Fund has issued a stark warning that Nigeria’s fragile fiscal position could be further imperilled by climate-related shocks, including rising sea levels and increasingly frequent extreme weather events, which threaten to upend growth, damage critical infrastructure, and destabilise the country’s financial system.
In its 2025 Article IV consultation report, the IMF said climate events now pose a major risk to Nigeria’s macroeconomic stability, with potential consequences for the country’s already strained balance of payments, public finances, and debt profile.
“Climate events significantly impact Nigeria’s growth outlook, fiscal sustainability, balance of payments and financial sector,” the report stated. “Extreme weather events and their frequency have a direct effect on growth and the balance of payments.”
Lagos, Nigeria’s commercial and financial nerve centre, was singled out as particularly vulnerable, with sea level rise projected to inflict serious economic damage. The IMF warned that infrastructure in coastal areas could be devastated, while sectors such as agriculture—already under stress—face further disruption.
The financial sector, though relatively small by global standards, is also at risk. The concentration of banking and financial services in Lagos means any physical or economic disruption could send ripples across the entire system. Deterioration in asset quality, combined with macroeconomic instability, could challenge the sector’s resilience.
Public finances are likely to face additional strain. The report forecasted “significant fiscal pressures” as the government is forced to spend more on emergency responses, infrastructure repair and climate adaptation measures—just as growth slows and tax revenues fall.
Nigeria’s public debt already surged to 52.3% of GDP in 2024, up from 41.5% the previous year, largely due to growing financing needs and a weakened naira. The African Development Bank’s latest country report puts Nigeria’s debt servicing at 4.1% of GDP in 2024—up from 3.7% in 2023—as borrowing costs rise amid tightening global financial conditions.
“These mounting obligations are consuming a greater share of public finances,” the IMF warned, “despite recent fiscal reforms.” Without a significant policy shift, the Fund predicts Nigeria’s debt-to-GDP ratio will continue to rise, further eroding the government’s ability to invest in essential services or build resilience against climate shocks.
To avoid a worsening crisis, the IMF called for urgent reforms aimed at boosting government revenue and investing in long-term climate adaptation. It also urged Nigeria to accelerate diversification away from oil dependency, warning that over-reliance on oil exports leaves the country dangerously exposed to both global price fluctuations and environmental risk.
“Climate adaptation must be integrated into Nigeria’s long-term economic planning,” the report said, but added that adaptation efforts alone would not be sufficient without deeper structural reforms and a more robust economic foundation.
With both fiscal and environmental threats looming, the report paints a sobering picture: unless Nigeria can stabilise its finances, broaden its revenue base, and reduce its exposure to climate and commodity shocks, the country risks being caught in a downward spiral of debt, underdevelopment, and rising vulnerability.
