President Bola Ahmed Tinubu has officially sought the National Assembly’s approval to borrow $2.209 billion from external sources to bridge the deficit in Nigeria’s 2024 budget.
The president, in a letter read by Speaker Abbas Tajudeen during Tuesday’s plenary session in the House of Representatives, highlighted that the loan request aligns with sections 21(1) and 27(1) of the Debt Management Office (DMO) Act. He added that the proposal had already been endorsed by the Federal Executive Council (FEC).
Tinubu emphasized that the borrowing is crucial for financing the 2024 budget, which expires on December 31, 2024.
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This development comes as Nigeria continues to grapple with a ballooning debt profile and a precarious fiscal situation. The Debt Management Office recently reported a significant increase in the country’s public debt, which rose from N97.34 trillion in December 2023 to N121.67 trillion by March 2024. This escalation is partly attributed to the impact of exchange rate fluctuations following the naira’s devaluation.
Nigeria’s debt burden now comprises N65.65 trillion ($46.29 billion) in domestic debt and N56.02 trillion ($42.12 billion) in external debt. As borrowing intensifies, fiscal experts are raising concerns about the sustainability of this trend, especially given the rising cost of debt servicing.
The surge in debt servicing costs has been alarming. In the first eight months of 2024, Nigeria spent N3.8 trillion servicing foreign debt, marking a 107.7% increase over the N1.83 trillion initially projected for the year. This translates to an overspend of N1.97 trillion, further underscoring the growing strain on the nation’s finances.
The borrowing pattern of the federal government has raised serious concerns among economic analysts, who argue that Nigeria appears to be borrowing primarily for consumption rather than for productive investments. They warn that with debt servicing costs outpacing revenue generation, Nigeria faces a worsening debt-service-to-revenue ratio, a critical indicator of fiscal health.
President Tinubu’s loan request is accompanied by additional communications to the National Assembly. He also submitted the 2025–2027 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for legislative review.
The MTEF serves as a three-year fiscal planning document that provides the foundation for annual budgets. The Federal Executive Council approved this framework last week, projecting optimistic economic indicators.
The MTEF outlines a crude oil benchmark price of $75 per barrel, with daily production levels estimated at 2.06 million barrels. It also sets an exchange rate of N1,400 per dollar and anticipates a gross domestic product (GDP) growth rate of 6.4 percent. While these figures suggest a positive outlook, critics have questioned their feasibility, citing Nigeria’s ongoing struggles with oil theft, aging infrastructure, and 33 percent inflation.
The government has yet to achieve meaningful gains from its tax reforms or efforts to boost crude oil production. Oil revenues, traditionally the backbone of Nigeria’s economy, have been undermined by production shortfalls and pipeline vandalism.
Meanwhile, fiscal measures such as the removal of fuel subsidies and the floating of the naira have aggravated inflation and worsened economic hardship for citizens.
With revenue streams falling short of projections, the country has increasingly relied on loans not only to finance budget deficits but also to service existing debt obligations. This approach, analysts warn, risks plunging Nigeria into a debt trap that could stifle long-term economic growth and compromise the government’s ability to fund critical infrastructure and social programs.
The National Assembly is expected to approve the loan request. If approved, it would add to Nigeria’s already bloated debt profile, raising critical questions about sustainability. Economic experts have warned that without urgent reforms to expand revenue streams and reduce wasteful spending, the cycle of borrowing to service debt will persist, deepening Nigeria’s fiscal crisis.