Nigeria’s $24.14bn external borrowing plan: New face of debt diplomacy

I am worried that the debt service-to-revenue ratio, which peaked at over 90% in 2023, is presently under pressure. President Bola Ahmed Tinubu is embarking on debt diplomacy, which is no longer relevant to most Nigerians; it is a serious threat to Nigeria’s national security because of our experience with the IMF/World Bank Structural Adjustment […]

I am worried that the debt service-to-revenue ratio, which peaked at over 90% in 2023, is presently under pressure. President Bola Ahmed Tinubu is embarking on debt diplomacy, which is no longer relevant to most Nigerians; it is a serious threat to Nigeria’s national security because of our experience with the IMF/World Bank Structural Adjustment Programme. Most recently, debts have led to the seizure of strategic assets in most developing countries. President Tinubu will soon embark on fruitless foreign debt diplomacy from the United States to the European Union to find a solution to the unsustainable budget deficit, which the federal government and the national assembly have created.

Nigeria has consistently faced budget deficits, meaning its government spending exceeds its revenue. In 2023, the government budget deficit was 6.10% of the country’s Gross Domestic Product (GDP). The deficit is largely financed through domestic borrowing, which has contributed to a significant increase in the public debt stock. The fiscal deficit has been on the rise. In the first 18 months of President Bola Tinubu’s administration (July 2023–December 2024), the deficit grew to N22.37 trillion, a 74.6% increase from the previous period. 

President Tinubu has requested the National Assembly’s approval to secure fresh foreign loans amounting to about $24.14 billion loans which to Nigerians will not transform the manufacturing sector in Nigeria. It is not a new argument that these loans to Nigeria will not bring good institutions, infrastructure, human capital and technology.

So far, the structural transformation that shifts productive resources from agriculture and mining to manufacturing, which has helped many countries achieve greater prosperity, has bypassed Nigeria. The limited structural transformation in Nigeria has not translated into more jobs, because the manufacturing sector itself requires extensive reform.

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Therefore, what Nigeria needs is a manufacturing renaissance, with more local value-addition that would create more and better-paid jobs, and contribute to fulfilling the aspirations of the Agenda 2063. More loans for Nigeria will not make Nigeria more resilient to economic shocks and less dependent on natural resource exports. Nigeria can achieve an ambitious goal if it taps into available opportunities while mitigating the challenges it faces.

Loans have been used as a weapon for the underdevelopment of Nigeria by the IMF and World Bank. Bureaucrats, too, can easily get a cut without much accountability. Yet, the loans are like a Trojan horse. Its consequences will be far-reaching. While the British expanded the empire through conquest, China adopted a subtle approach, which was sovereign debt. It is now the ammunition of choice for China to penetrate developing countries and get them to suit its expanding economic and military interests.

Nigeria’s debt-to-GDP ratio was 52.90% in 2024, according to data from Trading Economics. This ratio is expected to reach 52.60% by the end of 2025, according to Global Macro Models and analysts’ expectations. In the long term, the ratio is projected to trend around 51.50% in 2026 and 49.00% in 2027. The Nigerian Debt Management Office previously reported a debt-to-GDP ratio of 53.8% in September 2024, according to CEIC Data. A higher debt-to-GDP ratio can put pressure on a country’s finances. It means that a larger portion of the government’s revenue is used to service its debt, leaving less for other expenditures like education, healthcare, and infrastructure.

Nigeria’s public debt is set for another significant jump as President Bola Tinubu has requested the National Assembly’s approval to secure fresh foreign loans amounting to about $24.14bn. At the prevailing official exchange rate of N1,583.74/$1, the proposed borrowing would add approximately N38.24 to the existing debt stock, potentially pushing Nigeria’s total public debt from N144.67 at the end of 2024 to over N182.91 by 2026.

The fresh borrowing is composed of $21.54bn, €2.19bn, and ¥15bn. Using the latest market exchange rates—€1 to $1.1381 and ¥1 to $0.0068—the euro component converts to approximately $2.5bn while the Japanese yen translates to $102m. As of December 31, 2024, Nigeria’s total public debt stood at N144.67 billion, according to data from the Debt Management Office.

This represented a 48.58 per cent rise from the N97.34tn recorded at the end of 2023. The jump was driven by substantial increases in both domestic and external borrowings and compounded by the depreciation of the naira against major foreign currencies. 

The new borrowing plan covers both federal and sub-national governments over three years, with loans tied to key projects in power, security, agriculture, ICT, and infrastructure.

President Bola Ahmed Tinubu has put forward a substantial external borrowing plan totalling $24.14 billion, seeking approval from the National Assembly as part of Nigeria’s 2024-2026 financial strategy.

This move comes as the country’s public debt, which stood at N144.67 trillion at the end of 2024, is expected to increase to over N182.91 trillion by 2026. The proposed loans comprise $21.54 billion, €2.19 billion, and ¥15 billion, translating to approximately N38.24 trillion when converted at the current exchange rates.

Inwalomhe  Donald wrote via [email protected]