As President Bola Tinubu prepares to present the 2025 national budget to the National Assembly, Nigeria’s Federal Government (FG) faces growing concerns over its borrowing trends. Data indicates that the FG is set to exceed its domestic borrowing target for 2024 by ₦4 trillion, representing a 67% overshoot of the budgeted amount.
From January to November 2024, the FG borrowed ₦8.93 trillion from domestic sources, surpassing the annual target of ₦6 trillion by 49%. With ongoing borrowing activities, the total domestic borrowing for the year is projected to reach ₦10 trillion.
This increase occurs despite widespread concerns about the nation’s escalating debt stock and its potential impact on the economy.
The 2025 national budget plans a fiscal deficit of ₦9.22 trillion, up 18% from the ₦7.81 trillion deficit in 2024. According to the Federal Ministry of Budget and Economic Planning, the deficit will be funded through:
- ₦9.22 trillion in new domestic and foreign borrowings
- ₦312.33 billion from privatization proceeds
- ₦3.55 trillion in drawdowns on existing project-tied loans
Analysis of borrowing data reveals significant activity in government securities:
- ₦2.13 trillion borrowed in Q3’24 via Treasury Bills (NTBs), FGN Bonds and Savings Bonds.
- ₦1.18 trillion raised from NTBs, with FGN Bonds contributing ₦939.25 billion.
- Borrowing through Sukuk Bonds rose to ₦1.09 trillion in H1’24 from ₦742 billion in H1’23, while Savings Bonds increased from ₦30.7 billion to ₦55.2 billion.
As of H1’24, the FG’s total domestic debt stock stood at ₦66.96 trillion, up 38.6% from ₦48.31 trillion in H1’23.
Economic experts attribute the sharp rise in domestic borrowing to high-interest rates driven by monetary tightening.
- The Central Bank of Nigeria (CBN) increased the Monetary Policy Rate (MPR) from 18.75% in February to 27.5% in November. This hike caused interest rates on 364-day Treasury Bills to rise from 12% to 22.93% over the year.
- Higher borrowing costs have compounded inflationary pressures and created a “crowding-out” effect, making it difficult for private businesses to access affordable credit.
- David Adonri, Vice Chairman at Highcap Securities, warned that excessive borrowing risks pushing Nigeria into a “debt trap,” where new loans are required to service existing obligations.
- Victor Chiazor, Head of Research at FSL Securities, highlighted the inflationary impact of government borrowing and its effect on exchange rates.
- Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, emphasized the need for sustainable borrowing practices, warning that excessive debt could crowd out private sector investment.
Analysts agree that while borrowing is a tool for fiscal policy, its effectiveness depends on how funds are utilized. For example, project-tied borrowing for infrastructure can stimulate economic growth, while borrowing for recurrent expenditure provides little long-term benefit. Olatunde Amolegbe, former CIS President, stressed the importance of channeling debt into productivity-enhancing projects, cautioning against the use of loans to finance consumption. Tajudeen Olayinka, an investment banker, pointed out that the sustainability of Nigeria’s debt depends on improving productivity to reduce reliance on borrowing.
With the FG estimating ₦27.5 trillion in total expenditure for 2024 against a revenue projection of ₦18.32 trillion, experts urge a shift toward fiscal discipline and revenue diversification. This includes: Enhanced infrastructure investment to stimulate private sector growth. Policies to boost local production and reduce reliance on debt for recurrent spending.
While borrowing is inevitable for development, stakeholders stress the importance of maintaining sustainable debt levels to prevent long-term economic challenges.
