IMF Urges Nigeria, Others to Strengthen Governance To Cut Borrowing Costs
By NINI NDUONOFIT-AKOH
THE International Monetary Fund (IMF) has urged Nigeria and other sub-Saharan African countries to strengthen governance, improve fiscal credibility, and reform institutions to lower borrowing costs and attract sustainable financing.
At a session during the 2025 IMF/World Bank Annual Meetings in Washington, IMF economists Can Sever and Thibault Lemarie said rising debt costs in the region stem largely from domestic risks and weak governance, not unfair treatment by global markets.
They explained that when governance and macroeconomic fundamentals are factored in, African countries face similar risk premiums as other developing nations.
“Countries with sound institutions and transparent fiscal systems borrow more cheaply,” Lemarie said, adding that reforms to boost governance could expand fiscal space for development.
The economists warned of the growing use of syndicated loans, which have doubled since the pandemic, citing their opacity and higher governance risks.
They also cautioned that excessive domestic borrowing could crowd out private credit and heighten financial vulnerabilities.
Between 2020 and 2024, sub-Saharan African governments issued about $40 billion in Eurobonds and borrowed $170 billion through syndicated loans, with average Eurobond yields rising from 6.5% to 9.5%.
“Good governance isn’t just morally right—it’s fiscally smart,” Sever said. “It attracts investment, improves credit ratings, and reduces fiscal pressure.”
