In a move that aptly shows the ongoing fiscal challenges facing Nigeria, President Bola Tinubu has formally requested the National Assembly‘s approval for an additional borrowing of N1.8 trillion (approximately $2.2 billion). This request comes as the country grapples with a burgeoning debt profile, which is projected to hit N138 trillion in the coming months.
Context of the Request
The president’s request was presented during a session of the House of Representatives, where Speaker Tajudeen Abbas read the letter outlining the need for new external borrowing to finance the 2024 budget deficit, which stands at a staggering N9.7 trillion. The proposed loan is part of a broader strategy to manage Nigeria’s fiscal obligations while addressing pressing economic needs.
In his letter, President Tinubu highlighted that the new borrowing would be sourced through various instruments, including Eurobonds and Sukuk financing. He emphasized that this financial maneuvering is necessary to ensure that the government can continue to meet its obligations and invest in critical infrastructure and social programs.
Current Debt Status
As of the second quarter of 2024, Nigeria’s public debt had already surged to N134.3 trillion ($91.3 billion), marking a 10.35% increase from previous figures. The rising debt levels have raised concerns about fiscal sustainability and the long-term implications for economic growth. With this new loan request, analysts predict that Nigeria’s total debt could exceed N138 trillion, further straining public finances.
The Debt Management Office (DMO) has indicated that domestic debt accounts for approximately 53% of Nigeria’s total debt, amounting to N71.2 trillion, while external debt constitutes 47%, or N63.1 trillion. This reliance on both domestic and external borrowing reflects the government’s struggle to finance its budget amid declining oil revenues and rising inflation.
Implications for Economic Growth
The continued increase in Nigeria’s debt profile poses significant risks to economic stability. Debt servicing costs have already surged dramatically, with payments reaching N6.04 trillion in the first half of 2024—up from N3.58 trillion during the same period in 2023. This sharp rise indicates that a substantial portion of government revenue is being diverted to service existing debts rather than being invested in critical sectors such as education, healthcare, and infrastructure.
Economic experts warn that high levels of debt servicing can undermine private investment and hinder overall economic growth. The debt service-to-revenue ratio has become a major concern, as it limits the government’s ability to fund essential services and development projects.
As President Tinubu seeks approval from the National Assembly for an additional N1.8 trillion loan, Nigeria stands at a crossroads regarding its fiscal policy and economic management. The potential increase in the country’s debt profile to N138 trillion raises urgent questions about sustainability and accountability in public finance.
By Joseph Johnston,
Youth Editor,
Egogonews Hub
