President Bola Tinubu has requested approval from the National Assembly for a new external loan of $2.209 billion (N1.767 trillion) to address part of Nigeria’s N9.17 trillion fiscal deficit in the 2024 budget.
This request aligns with the 2024 Appropriation Act but has sparked concerns among financial experts about the implications of further borrowing.
In letters addressed to Senate President Godswill Akpabio and House Speaker Tajudeen Abbas, President Tinubu cited Sections 21(1) and 27(1) of the Debt Management Office (DMO) Establishment Act, 2003, as the legal basis for the proposal.
He noted that the borrowing plan, already approved by the Federal Executive Council, is critical to financing the 2024 budget deficit through Eurobonds or other external instruments.
The President also submitted the 2025–2027 Medium Term Expenditure Framework and Fiscal Strategy Paper to the National Assembly, seeking expedited passage. This request was referred to the Senate Committees on Finance and National Economic Planning for review.
Senator Akpabio further directed the Senate Committee on Local and Foreign Debts, chaired by Senator Aliyu Wamako (APC, Sokoto), to deliberate on the loan request and report back within 24 hours.
In his correspondence, Tinubu stressed the urgency of swift legislative action, authorising the Finance Minister and the DMO to take necessary steps for executing the borrowing plan upon approval.
Experts Warn Against Debt Risks
Reacting to the proposal, financial analysts highlighted concerns over Nigeria’s increasing debt burden and the potential impact of the new loan on the economy.
David Adonri, Executive Vice Chairman at Highcap Securities Limited, said, “FGN is already in a debt trap, thus requiring new foreign debt to service outstanding debt. FGN also requires new foreign debt to finance the import content of its budget. FGN is now in a quagmire as sinking further in debt worsens its precarious situation. Yet, without additional foreign debt, it cannot survive. Although I don’t know the structure of the new debt, its long-run effect is likely to be devastating for the economy.”
Prof Uche Uwaleke, President of the Association of Capital Market Academics of Nigeria, acknowledged that the borrowing plan aligns with the 2024 budget but expressed concerns about its implementation.
He said, “The request is part of the borrowing plan contained in the 2024 budget and so in order. However, there is a need to specify the projects to be financed, whether or not they are self-liquidating, and how the loan will be repaid. This is necessary considering the country’s already huge debt burden. Another concern I have is that the emphasis seems to be on Eurobonds, which are non-concessional and very costly. I think more attention should be on the Sovereign Sukuk, which are project-tied and a lot cheaper.”
Clifford Egbomeade, a public affairs analyst, highlighted the risks associated with rising debt servicing costs, noting that Nigeria spent $3.58 billion on debt servicing in the first nine months of 2024, a 39.77% increase from 2023.
“President Bola Tinubu’s request for a fresh external loan of N1.77 trillion ($2.209 billion) reflects Nigeria’s ongoing struggle with fiscal deficits. While external borrowing can provide immediate relief to budgetary constraints, the devaluation of the naira has further exacerbated the real value of these obligations, making external loans costlier to repay in local currency,” he said.
Egbomeade stressed the importance of utilizing the loan effectively, stating:
“It will largely depend on how effectively it is utilized. If the funds are channeled into productive sectors like infrastructure, healthcare, or education, they could stimulate economic growth, create jobs, and improve public services. However, Nigeria’s history of fiscal mismanagement raises concerns about transparency and accountability in loan utilization. Without proper oversight, the loan could contribute to wasteful spending or fail to deliver the intended developmental outcomes, leaving the country burdened with even higher debt.”
Call for Structural Reforms
Experts also emphasized the need for Nigeria to diversify its revenue sources and implement structural reforms to reduce reliance on borrowing.
“Over-reliance on oil revenue and federal allocations is unsustainable,” Egbomeade observed. “In 2023, 32 states relied on FAAC allocations for at least 55% of their total revenue, and 14 states depended on these funds for over 70%. The country’s fiscal sustainability remains precarious.”
He added, “To mitigate the risks associated with rising debt, the government must prioritize boosting internally generated revenue, restructuring existing loans, and adopting policies that ensure efficient debt utilization. Without these measures, further borrowing could deepen Nigeria’s economic challenges rather than alleviate them.”
As the National Assembly reviews the proposal, the balance between financing the budget deficit and avoiding unsustainable debt remains a critical consideration for policymakers.