Nigeria’s Debt Crisis Deepens as Tinubu Seeks $2.2bn Loan Approval

President Bola Tinubu has submitted a request to the National Assembly seeking approval for a $2.209 billion (N1.767 trillion) external loan, as outlined in the 2024 Appropriation Act. This borrowing is intended to address part of Nigeria’s N9.17 trillion fiscal deficit in the 2024 budget. However, experts have raised concerns about the nation’s growing debt burden and the potential long-term economic impacts.

In his letter to the Senate President, Godswill Akpabio, and the Speaker of the House of Representatives, Tajudeen Abbas, Tinubu emphasized that the borrowing is part of Nigeria’s broader fiscal strategy. He explained that the funds would be sourced through Eurobonds or similar external instruments and urged the legislature to expedite its approval to ensure timely implementation. The Federal Executive Council (FEC) has already approved the plan, and the Debt Management Office (DMO), along with the Minister of Finance and Coordinating Minister of the Economy, has been directed to proceed with its execution upon legislative approval.

The Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) for 2025–2027, also recently approved by the FEC, was presented to the Senate for further consideration. This document was referred to the Senate Committees on Finance and National Economic Planning for review. Meanwhile, the Senate Committee on Local and Foreign Debts, led by Senator Aliyu Wamako, was tasked with reviewing the loan request and reporting back within 24 hours.

Economic experts have expressed reservations about the proposed borrowing. David Adonri, Executive Vice Chairman of Highcap Securities Limited, warned that Nigeria is in a “debt trap,” requiring new loans to service existing debts and fund the import components of its budget. Adonri cautioned that while additional borrowing is necessary for short-term survival, the long-term impact could be economically devastating.

Prof. Uche Uwaleke, President of the Association of Capital Market Academics of Nigeria, acknowledged that the loan request aligns with the approved 2024 budget but stressed the need for clarity on how the funds will be used. He advocated for transparency in identifying self-liquidating projects and repayment plans, noting the high costs of Eurobonds compared to more affordable alternatives like Sovereign Sukuk, which are project-specific.

Public affairs analyst Clifford Egbomeade highlighted the rising strain on Nigeria’s finances, with debt servicing costs reaching $3.58 billion in the first nine months of 2024, a 39.77% increase from the previous year. He warned that the devaluation of the naira has further inflated the real cost of external loans. Egbomeade argued that while loans can support critical sectors like infrastructure, healthcare, and education, the history of fiscal mismanagement raises concerns about transparency and accountability.

He also pointed to Nigeria’s over-reliance on oil revenues and federal allocations, with many states heavily dependent on the Federation Account Allocation Committee (FAAC) for their budgets. To address these challenges, Egbomeade urged the government to prioritize diversifying revenue sources, restructuring existing debt, and implementing robust oversight mechanisms to ensure efficient utilization of borrowed funds.