Daily Trust’s Board of Economists cautions on borrowing, seeks end to budget rollover

The Daily Trust’s Board of Economists has urged the federal government to reduce reliance on short-term domestic borrowing that directly injects liquidity into the financial system. The board said where borrowing is unavoidable, it should be explicitly linked to productivity-enhancing development projects and financed through appropriate long-tenor instruments such as infrastructure bonds, which align repayment […]

The Daily Trust’s Board of Economists has urged the federal government to reduce reliance on short-term domestic borrowing that directly injects liquidity into the financial system.

The board said where borrowing is unavoidable, it should be explicitly linked to productivity-enhancing development projects and financed through appropriate long-tenor instruments such as infrastructure bonds, which align repayment with long-term economic returns.

This was contained in a communique signed by the Chairman of the Board, Dr. Shehu Yahaya, at the end of fourth quarter meeting with the theme: “Restoring Fiscal Coherence in Nigeria”held at the weekend.

The communique advised that going forward, stronger fiscal-monetary coordination is required to ensure that policy actions are mutually reinforcing rather than offsetting.

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It also advocated that financing recurrent expenditure through domestic borrowing should be curtailed, “as it has proven inflationary and has weakened monetary transmission.”

“Improved coordination of borrowing plans, expenditure timing, and liquidity forecasts between fiscal authorities and the CBN would enhance policy effectiveness, further lower inflation, and support sustainable growth. The federal budget and its execution should reflect this coordinated policy approach,” it said.

 

Late budget presentation flayed

The communique knocked the federal government for maintaining a culture of submitting budgets late to the National Assembly, but expressed optimism that this would be the last time, as the President has promised.

It said the Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for 2026-2028 were presented on December 3, 2025, contrary to the stipulations in the Fiscal Responsibility Act 2007, as provided in Section 11(b), which requires that the MTEF/FSP be submitted at least four months before the beginning of the new Fiscal Year.

“Thereafter, the Budget Estimates should be submitted a few months later, i.e., by convention in October or November at the latest, to allow enough time for NASS to conduct exhaustive deliberations. Consequently, the MTEF/ FSP, which should form the bedrock on which the FY26 Budget is prepared, could not be discussed with the needed rigour,” it said.

It said this would cascade to the discussions of FY26 Budget estimates, which were presented to the National Assembly on 19 December 2025 (and expected to be signed by the President on 1 January 2026), because of inadequate time for in-depth deliberations.

“Abridging the time for submissions and deliberations in this manner has led to sub-optimal outcomes, as we have seen in the poor implementation of the capital Budget across the MDAs in 2024 and 2025. Indeed, the 2024 budget, though signed on January 1, 2024, was only completed subsequently. Several Committees of both the House of Representatives and the Senate continued deliberations to finalise the budget, weeks after the budget was signed, which made it untidy, and, not surprisingly, the implementation of the FY 2024 was beset with several problems and had to be extended many times until December 2025,” the communique said.

It said if the budget is rushed under this compressed timeline, its implementation may suffer a similar outcome as the 2024 and 2025 budgets.

It therefore called for an organic budget law, which incorporates the FRA of 2007, and adds explicit timetables for budget submission to the National Assembly, as well as clarifies the scope for budget review by the National Assembly. This should help reduce arbitrariness.

 

Pace of debt worrisome

It went on to express worry on the pace of the rise of Nigeria’s public debt which has risen to N152.39trn (USD99.66 billion) as of June 2025 and may exceed N160 trillion by year-end.

It wondered if Nigeria’s debt level was sustainable, even though the rise was occasioned by fresh borrowings, high domestic interest rates, and exchange-rate adjustments.

“However, the issue is not the size alone but the pace of accumulation, creditor mix, servicing costs, and Nigeria’s limited fiscal capacity, all of which reveal an economy balancing the need for growth-supportive financing with the risks of fiscal strain. The rapid build-up reflects structural weaknesses, which include less than anticipated revenue mobilisation, naira depreciation following foreign exchange reforms, elevated yields on domestic instruments, persistent budget deficits and reduced access to cheap concessional loans, thereby forcing heavier reliance on costlier, market-based borrowings such as the Eurobond.”

It said like many of its peers in the developing world, Nigeria has faced periods where debt obligations crowd out development spending, particularly between 2020 and 2023.

“Yet Nigeria stands out for its improving fundamentals, with rebased GDP growth strengthening to 4.23% in Q2 2025 but slowed to 3.98% in Q3 2025, higher than 3.86% reported in Q3 2024.

Besides debt obligations, borrowing through the issuance of fixed-income securities has had its negative consequences. The scale of government domestic borrowing exerted upward pressure on sovereign yields across the maturity spectrum, anchoring market interest rates at elevated levels.”

“The Debt Management Office has also continued to argue that Nigeria’s public debt is sustainable on the strength of the debt-to-GDP ratio, which is shy of 40 percent and lower than the international threshold of 56 percent. But this position is misleading, given the country’s weak revenue capacity. It should always be remembered that debt is paid by revenue, not by GDP.”

It added that despite recent reforms and improved macroeconomic stability that support conditions for a pathway to reduced fiscal pressure, the outlook remains fragile, demanding sustained, disciplined reforms, smart refinancing, and stronger revenue mobilisation to ensure long-term debt sustainability.

“Nigeria’s rising debt presents both risks and opportunities. High debt-service costs and unpredictable external shocks continue to constrain spending on infrastructure, social programmes, and other priority areas like climate financing. This leaves subnationals particularly vulnerable. Recent improvements in macroeconomic stability and multilateral support offer a possibility of a more stable outlook going forward.”

 

What will FG do with increased revenue from tax laws

It wnt on to question what the government intends to do with the increased revenue to be generated with the consolidated tax law.

“Will increased tax revenue result in increased welfare spending, such as on health and education, as was pointed out earlier?”

It also asked on the potential impact of the laws on industrialisation and poverty reduction.

“Will the reduced tax burden on small businesses be a strong incentive, or will the increased documentation and surveillance burdens outweigh it? More recently, there have been swirling allegations that the provisions of the Tax Law had been substantially modified after the approval of the National Assembly. The modifications relate to parliamentary oversight, court jurisdiction, and enforcement, etc. Concerns about the potential for violation of personal liberty and political victimisation should be thoroughly addressed. It is important that the Executive discusses these allegations with the National Assembly and responds to these issues to enhance the credibility of the law and its enforcement.”

It concluded that it is clear that fiscal policy, in all its ramifications, is central to the quest for development and poverty reduction but restoring fiscal credibility, coherence, and anchoring it at the heart of government programming and implementation is a requirement for achieving the goals of social progress in Nigeria.