- Loans to address budgetary deficits, support economic recovery initiatives
- Borrowing to reduce to N1.775trn in 2026, N2.648trn in 2027
- Economists doubt sustainability of Nigeria’s debt burden
The Federal Government has unveiled plans to borrow an additional N6.245 trillion from foreign lenders, including the World Bank, International Monetary Fund and other international financial institutions, over the next three years.
This borrowing, according to findings from The Point is aimed at addressing budgetary deficits, financing critical infrastructure projects, and supporting economic recovery initiatives.
The breakdown of the proposed borrowing is contained in the Medium Term Expenditure Framework and Fiscal Strategy Paper submitted by President Bola Tinubu to the National Assembly.
The MTEF provides the basis for annual budget planning and consists of a macroeconomic framework that indicates fiscal targets, estimates, revenues and expenditure, including government financial obligations in the medium term.
The document, prepared by the Ministry of Budget and National Planning, also sets out the underlying assumptions for these projections, provides an evaluation and analysis of the previous budget and presents an overview of consolidated debt and potential fiscal risks.
Details of the planned borrowing showed that the government is planning to borrow the sum of N1.843 trillion in the 2025 fiscal period.
The planned borrowing is expected to reduce to N1.775 trillion in 2026 before hitting a peak of N2.648 trillion in the 2027 fiscal period.
This development highlights Nigeria’s ongoing struggle with revenue mobilization and fiscal discipline, as the country continues to seek external support to meet its growing economic challenges.
Amidst mounting concerns for the government’s appetite for borrowing to fund the budget deficit, the government officials have defended the borrowing plans, emphasizing the need for external financing to bridge Nigeria’s revenue shortfalls and maintain momentum in developmental projects.
The loans are expected to fund initiatives in infrastructure, education, healthcare, and other critical sectors, which are key to driving economic growth and achieving sustainable development goals.
“Despite a series of assurances from the government, the proposal has raised concerns among economic experts and civil society groups about the sustainability of Nigeria’s debt burden”
But the government said in the MTEF that the rise in federal budget deficit overtime reflects the systemic revenue mobilization challenges, low oil and gas revenues, and sharp increase in fuel subsidy costs.
The limited deficit financing options necessitated the reliance on money financing previously with the associated macroeconomic dislocations and cost.
It added that the discontinuation of fuel subsidies, reduction in waivers and tax expenditures, higher crude oil production and high oil prices are expected to reduce the growth of budget deficits and current government fiscal pressures.
In the medium-term, the government said it will explore cheaper and more flexible borrowing options to finance fiscal deficits.
“Focus in the medium term will be on accelerating the implementation of revenue mobilization measures for remarkable increase in government revenue. Government shall only borrow as a last resort and for specific purposes that contribute to long-term economic growth, or to address critical needs,” the document added.
Despite a series of assurances from the government, the proposal has raised concerns among economic experts and civil society groups about the sustainability of Nigeria’s debt burden.
The country’s total public debt stood at N87.38 trillion as of September 2024, with external debt accounting for a significant portion.
Critics have warned that the new loans could further strain the nation’s ability to service its debt, especially with rising interest rates and uncertainties in the global economy.
Former Vice President Atiku Abubakar had last month said that external loans being taken by President Bola Tinubu are bone-crushing to Nigerians and bringing insufferable pressure on the economy.
Atiku had in a statement he personally signed, cited a recent World Bank report showing Nigeria as the third most indebted country to the International Development Association.
“Nigeria is sinking further in debt, and the National Assembly has become an accomplice once more. Tinubu had, in July this year, boasted that the FIRS and Customs under his watch have collected all-time high revenues to finance the Budget. Why then are they still borrowing?
There is something that they are not telling Nigerians, even as they are being crushed by a combination of their failed trial-and-error policies and loan rackets.
“These Tinubu’s loans are bone-crushing to Nigerians and bring insufferable pressure on the economy, especially when they are not properly negotiated and utilised.
“It is concerning that the voracious appetite for these humongous loans is powered by corruption and not for infrastructure and development needs. A report by Budgit, a budget watchdog, has disclosed that the 2024 Budget is a mess because of the level of pork associated with it.
“I feel a sense of personal agony seeing that just a few years after the administration of President Obasanjo took our country out of foreign indebtedness, we are today back at the top spot in the same conundrum,” Atiku said.
The Lagos Chamber of Commerce and Industry had also said in a statement signed by Director General, Chinyere Almona, that reliance on borrowing to fund budget deficits, without considering alternative financing strategies, poses a grave risk to infrastructure development and economic stability.
It noted that rising debt servicing obligations could outpace allocations for critical projects in the 2025 federal budget, exacerbating the nation’s infrastructure deficit.
The LCCI also expressed concerns about currency volatility, with the depreciating Naira increasing the burden of dollar-denominated debt servicing.
Efforts by the Central Bank of Nigeria to stabilize the foreign exchange market have yet to yield meaningful results, further complicating debt repayment strategies.
To address these challenges, the LCCI recommended several measures, which include that the government should ensure transparency and accountability in deploying the borrowed funds.
According to the Chamber, the funding of critical business-supporting infrastructure like electricity supply, security for food production and logistics, and enablers manufacturing should be of utmost importance.
It noted that beyond borrowing, the Federal Government should intensify efforts to expand the non-oil revenue base through tax reforms, improved compliance, and the promotion of export-driven sectors like agriculture and manufacturing.
Urgent steps according to the Chamber are required to stabilize the naira and address the structural issues in the foreign exchange market to reduce the negative impact of external borrowing.
It added that greater reliance on PPPs for infrastructure development can reduce the pressure on public borrowing while encouraging private sector participation and efficiency.
Analysts have also called for greater transparency regarding the terms and conditions of the proposed loans.
They also stressed the importance of ensuring that the borrowed funds are efficiently utilized and tied directly to projects that deliver measurable economic benefits.
Meanwhile, data from the Debt Management Office’s external debt service reports has shown that Nigeria has serviced its debt to the International Monetary Fund with not less than $1.22 billion over nine months,
The payments were made as part of principal repayments for three consecutive quarters, from Q4 2023 to Q2 2024.
The breakdown of the payments shows that $401.73m was paid in Q4 2023, followed by $409.35m in Q1 2024, and $404.24m in Q2 2024, amounting to a total of $1.22bn.
As a result of these repayments, Nigeria’s debt to the IMF has decreased significantly, dropping from $3.26bn as of June 2023 to $1.16bn by June 2024.
This reflects a substantial reduction of 64.42 percent within one year.
It was earlier reported that the current administration of President Bola Tinubu is expected to pay off a $3.4bn owed to the International Monetary Fund during his tenure.
In April 2020, the IMF disbursed a $3.4bn emergency financial assistance to Nigeria.
The loan was approved under the Rapid Financing Instrument by the Executive Board of the IMF on April 28 to address challenges arising from the economic impact of COVID-19 in the country.
The loaned amount was disbursed on April 30, 2020.
A statement by the IMF on the loan read, “The IMF approved $3.4bn in emergency financial assistance under the Rapid Financing Instrument to support the authorities’ efforts in addressing the severe economic impact of the COVID-19 shock and the sharp fall in oil prices.”
It was also reported earlier that Nigeria was expected to pay SDR373.81m ($497.17m), which included principal (SDR306.81m/$408.06m) and interest fee (SDR67m/$89.11m) on the loan.
Also, Nigeria was expected to pay a total of SDR1.32bn ($1.76bn) in 2024. This comprised a principal fee of SDR1.23bn ($1.64bn) and an interest fee of SDR94.76m ($126.03m).
In 2025, Nigeria will be expected to pay a total of SDR650.58m ($865.27). This comprised a principal fee of SDR613.63m ($816.13m) and an interest fee of SDR36.95m ($49.14m).
The country would be expected to pay a total of SDR25.56m ($33.99m) each in 2026 and 2027, which would be only an interest fee. This is the least amount during the repayment period.
In total, the administration of Tinubu would be expected to pay $3.19bn to the IMF, which further meant that the previous administration likely paid $320m on loan.
In its 2022 financial statements, the CBN referred to the loan.
It stated, “In 2020, the bank entered into a rapid financing instrument arrangement with the International Monetary Fund on behalf of the Federal Government of Nigeria. The loan is a 5-year tenor facility, repayable after a moratorium of two years and the interest rate is one per cent per annum.”
The CBN added, “Repayment of the IMF loans as well as charges is the responsibility of the bank.”
President Tinubu will present the 2025 budget to the joint assembly of the National Assembly on Tuesday (tomorrow).
This was disclosed by the Senate President, Godswill Akpabio, during plenary session on Thursday.
Akpabio announced that the budget presentation will take place at the House of Representatives’ chamber.
President Tinubu had earlier submitted the Medium-Term Expenditure Framework and Fiscal Strategy Paper for 2025-2027 to both the Senate and the House of Representatives.
The Senate Committee on Finance, National Planning, and Economic Affairs has been directed to consider the MTEF/FSP documents and report within one week.
Key parameters in the MTEF/FSP include a $75 oil price benchmark per barrel, daily oil production of 2.06 million barrels, an exchange rate of N1, 400 to $1, and a targeted GDP growth rate of 6.4%.
These figures form the basis for consideration and approval of the proposed N47.9trn 2025 budget.
