Nigeria Clears $3.4 Billion IMF Loans. Interest Payments Linger Till 2029

Nigeria has settled the principal of a $3.4 billion emergency loan secured from the International Monetary Fund (IMF) during the COVID-19 crisis, marking a milestone in its fiscal recovery. However, the nation remains obligated to pay millions in accrued interest, underscoring the complexities of international debt management. 

The federal government confirmed this week that Nigeria repaid the final tranche of the loan in April 2024, effectively removing the country from the IMF’s debtors list in May. Otega Ogra, Senior Special Adviser to the President, hailed the development in a social media post on May 6, noting it was the first time since 2020 that Nigeria owed the IMF no principal. 

Yet, IMF records reveal a nuanced reality; while the principal is cleared, Nigeria still owes approximately SDR 125.99 million (about ₦275.28 billion) in interest, classified as “charges,” with payments stretching through 2029. 

Special Drawing Rights (SDRs) are international reserve assets created by the International Monetary Fund (IMF) to supplement the foreign exchange reserves of its member countries. Though often misunderstood as a form of currency, SDRs do not function as money in the traditional sense. Instead, they represent a claim to a basket of major international currencies—namely the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound. The value of the SDR is determined daily based on weighted contributions from these five currencies.

The IMF approved the $3.4 billion (SDR 2.45 billion) loan in April 2020 under its Rapid Financing Instrument (RFI), a program designed to address urgent balance-of-payments crises. Disbursed in a single tranche, the loan carried a one-time 0.5% service fee and a variable interest rate, pegged to the IMF’s SDR rate plus a 0.6% margin. 

As of May 2025, Nigeria’s effective interest rate stands at 3.6% annually, calculated quarterly. Despite repaying the principal ahead of the two-year schedule (2023–2025), interest accrued during the loan’s lifespan remains payable. IMF projections outline Nigeria’s pending charges: SDR 22.35 million in 2025, followed by roughly SDR 25.9 million annually from 2026 to 2029.  In 2023, outstanding principal dropped from SDR 2.45 billion (June) to SDR 1.84 billion (December), and by March 2024, the balance fell to SDR 306.81 million before April’s final principal payment.  Quarterly interest payments will exist, totaling SDR 125.99 million by 2029. 

The IMF’s “Projected Payments” tables confirm Nigeria faces no penalties or surcharges, as it adhered to borrowing limits and timelines. 

While clearing the principal alleviates immediate debt pressure, the lingering charges, equivalent to nearly ₦275 billion, remain a fiscal obligation. Experts stress the need for public awareness of loan terms beyond principal repayment, particularly as global interest rates fluctuate. 

This residual debt can be attributed to accrued charges, outstanding interest payments, or exchange rate adjustments. Since SDRs are not fixed to a single currency, fluctuations in the value of the currencies that make up the SDR basket can affect the total amount a country owes in local currency terms.

The Central Bank of Nigeria (CBN) has yet to comment on how these payments will impact foreign reserves or budgetary allocations. However, the structured timeline offers predictability, with charges diminishing annually until 2030. 

Nigeria’s repayment of the $3.4 billion IMF loan principal marks a significant step in its post-COVID fiscal recovery, signaling improved financial discipline and restoring some international confidence for the President Bola Tinubu-led administration, however, the continued obligation to pay approximately SDR 125.99 million in interest charges through 2029—equivalent to ₦275 billion—illustrates the enduring burden of sovereign debt. While the country is no longer on the IMF’s debtors list for principal, these recurring interest payments will strain public finances amid uncertain global economic conditions, and with the Central Bank of Nigeria silent on the implications for reserves or budget allocations, questions remain about long-term fiscal sustainability. 

Nigeria’s early repayment is commendable, but the path to true debt independence will depend on disciplined financial planning, transparent communication, and resilient economic reforms to manage future obligations.