President Bola Tinubu’s fresh request to the National Assembly to approve new external loans totalling $24.14 billion is tiresome.
Once again, it raises concerns that Nigeria is hurtling towards a fiscal precipice, with public debt increasing at an alarming rate even as government revenues show signs of recovery.
The proposed loans could balloon Nigeria’s total public debt to an astounding N182.91 trillion (approximately $69.92 billion) by 2026.
This request follows a 52.7 per cent surge in external debt and a 48.58 per cent year-on-year increase in total debt in 2024, driven by a combination of relentless borrowing, a steep depreciation of the naira, and insufficient financial governance.
The numbers paint a stark picture. At the current exchange rate of N1,586.15 to the dollar (as of 30 May), the proposed new loans would add N38.28 trillion to Nigeria’s debt stock, representing a 26.43 per cent jump from the country’s already daunting N144.67 trillion debt as of December 2024.
Tinubu explained that the external borrowing plan forms part of the 2025–2026 rolling borrowing programme and is aimed at supporting key sectors: infrastructure, agriculture, healthcare, education, water resources, security, and public finance reforms.
He noted that the projects covered by the plan had undergone technical and economic appraisals and were selected for their potential to stimulate growth, generate jobs, and improve public service delivery.
However, the underlying fiscal reality is that debt servicing now consumes a lion’s share of national resources, leaving little room for meaningful capital investment.
In 2024 alone, the naira’s collapse inflated the country’s external debt by 83.89 per cent, transforming what should be manageable currency risks into looming fiscal crises.
The situation is further complicated by an impending $1.11 billion Eurobond repayment due in November 2025, which threatens to deplete the country’s foreign reserves.
There are concerns that the country’s debt-to-GDP ratio, once a point of relative comfort, has surged to 52.52 per cent, breaching the government’s own 40 per cent threshold. This could trigger sovereign credit downgrades and spook investors.
Nigeria’s debt trajectory has trended upwards over time. The Federal Government’s borrowings increased by 658 per cent between 1999 and 2021, from N3.55 trillion to N26.91 trillion, according to BudgIT.
Under former President Muhammadu Buhari’s administration, foreign debt increased by more than 291 per cent.
In May 2023, Nigeria’s public debt stood at N87.38 trillion (approximately $55.2 billion), but it rose rapidly to N144.67 trillion (a 60.3 per cent increase) by the end of 2024, equivalent to approximately N629,000 per person.
The 2025 budget reflects a fiscal deficit of N13.08 trillion, constituting approximately 38 per cent of the Federal Government’s revenues, 3.87 per cent of estimated GDP, and 23 per cent of total expenditure, alongside a projected debt servicing obligation of N14.32 trillion.
The African Development Bank flagged Nigeria’s rising debt costs a week ago, stating that the country is projected to spend 75 per cent of its revenues on interest payments in 2025.
This debt spiral is made even more dangerous by a glaring deficit in accountability. Past borrowings have failed to deliver quality schools, healthcare facilities, roads, rail, and power infrastructure.
Scepticism about the government’s borrowing spree is fuelled by a lack of transparency and persistent questions about the use of previous loans.
Budget implementation reports have not been published since the second quarter of 2024, leaving the public and watchdog organisations in the dark about how borrowed funds are being spent.
The $3.4 billion loan secured from the IMF at the height of the COVID-19 crisis is shrouded in mystery, with no comprehensive accounting provided to date.
Given these realities, Nigeria cannot continue to rely on debt-based funding as its primary development strategy. Pivoting towards asset-based solutions and greater private sector involvement offers a path out of the current quagmire.
The NNPC is sitting on $300 billion in assets. Given its long history of inefficiency, a substantial divestment and complete sale of its problematic refineries is overdue. This can raise cash for infrastructure and onboard private investors to help give the company new energy and direction. Other assets, such as Ajaokuta Steel, should be sold without delay.
The Asset Management Corporation of Nigeria must renew efforts to recover N4 trillion in delinquent debt acquired from banks at the government’s expense.
The government’s proposed $2 billion domestic dollar bond, if managed prudently, could deepen local capital markets and reduce dependence on volatile external funding.
The tax reforms provide opportunities to mobilise domestic financial resources more effectively and move the tax-to-GDP ratio to the target of 18 per cent, up from the 13.5 per cent cited by Tinubu in his midterm report. The target implementation date of July is just a month away. Parliament should speed up the passage process.
The recent rebound in oil production to 1.5 million barrels per day in April offers some revenue upside, but this is no windfall as crude prices remain volatile, and forward crude sales, estimated at $21.5 billion since 2019, have maturity dates extending as far as 2034.
In seeking to assuage fears, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, assured last week that the administration is considering a self-financing infrastructure model. This model will see major national projects like ports, roads, and solar power plants concessioned to private operators, with proceeds used to defray project-related debt.
He pointed to expansion plans for Nigeria’s ports and solar projects as examples of revenue-generating initiatives that will bring in more business and user charges to help offset loan costs. This thinking is welcome, but it is private sector participation that can bring discipline, innovation, and accountability.
India, China, Indonesia, the Philippines, and Malaysia have developed alternative models for infrastructure funding, including project finance, PPPs, private equity, corporate bonds, and sukuk, tailored to suit their specific needs.
To bridge Nigeria’s estimated $3 trillion infrastructure deficit in the long term, firm legal guarantees and fully transparent concession terms will be required to attract private capital, especially from offshore entities.
Lack of transparency, inadequate risk assessment, and poor stakeholder engagement led to the failure of the landmark Lekki-Epe Expressway concession. The MM2 Airport concession was not fully implemented, with the hospitality components suspended due to legal wranglings.
There is little clarity around the Infrastructure Tax Credit Scheme, designed to attract private capital for the construction of nine major highways at a cost of N1.5 trillion. Nigeria must substantially de-risk the investment climate to attract capital inflows.
Ultimately, fiscal discipline must become a national imperative. The government cannot justify further borrowing despite its shrinking fiscal space while supporting a bloated cabinet, duplicative ministries, departments, and agencies, a high-maintenance legislature, multitudes of political aides at national and sub-national levels, needless foreign trips, mile-long motorcades, and other fripperies.
A zero-based budgeting system can ensure that every financial allocation is substantiated and aligned with national objectives.
Anti-corruption efforts must be ramped up to plug loopholes and leakages in public finances and ensure value for money in government spending.
The Federal Government needs to shed some weight and responsibilities by consolidating MDAs in line with the Steven Oronsaye Panel report and pushing for fiscal federalism anchored on resource control and the concomitant realignment that will enable states to drive significant infrastructure development.
Regardless of attempts at justifying additional borrowing, planned or actual, the government must be acutely aware that Nigeria cannot afford to slip into an unsustainable debt crisis.
