Nigeria’s Mounting Debt: Tinubu’s Ambitious Borrowing Plan Sparks Alarm and Government Reassurance

By Godfrey Asuquo

 President Bola Tinubu’s administration is seeking approval from the National Assembly for an ambitious foreign borrowing plan totalling approximately ₦45 trillion (over $24 billion) for the 2025 budget, including significant sums in US Dollars, Euros, and Japanese Yen.

This request, part of the 2024-2026 External Borrowing Rolling Plan, has ignited a fierce debate across Nigeria, drawing sharp criticism from opposition figures, economists, and civil society groups concerned about the nation’s burgeoning debt burden and the transparency of past borrowings.

The government maintains that these funds are critical for vital sectors such as infrastructure, agriculture, healthcare, education, water resources, security, and public finance reforms. President Tinubu’s administration argues that these investments are essential to address Nigeria’s substantial infrastructure deficit and bridge financial shortfalls amid declining domestic funding. The proposed borrowing, which constitutes nearly two-thirds of the average annual budget and approximately 60% of the 2025 budget, aims to stimulate employment, promote skill acquisition, foster entrepreneurship, reduce poverty, and enhance food security.

Table: Proposed 2025 Borrowing Breakdown

However, the proposed borrowing plan has been met with widespread apprehension. Former Vice President Atiku Abubakar has vehemently condemned the move as “reckless and dangerous,” warning that it threatens Nigeria’s future. He points to Nigeria’s public debt, which soared to ₦144.7 trillion by December 2024, a 65.6% increase since President Tinubu assumed office in 2023. Atiku criticizes the administration’s “addiction to borrowing,” likening it to a “Ponzi scheme” where new loans are secured to service existing ones.

Economists are equally sounding the alarm about debt sustainability. If fully approved, the new borrowing could escalate Nigeria’s external debt by nearly 50% from its 2023 baseline in just two years, potentially pushing the total public debt to over ₦182 trillion by 2026, or around $64.65 billion.

Expert and Analyst Concerns on Borrowing Strategy and Debt Scale

Ikemesit Effiong, Head of Research at SBM Intelligence, has weighed in on the implications of this significant borrowing. Effiong stated that if Nigerians “were sure that a lot of these resources will be channeled towards the urgent developmental priorities that Nigeria has,” such as health, education, social services, and infrastructure development, then “a short-term increase in debt… would be somewhat defensible.” However, he cautioned that this is not the most opportune time for Nigeria, or indeed many developing countries, to be taking on new debt due to the current global economic situation.

Effiong highlighted the cost implications of the borrowing, noting that while some funds will come from domestic investors, others will be from foreign investors across different currencies, including USD, pounds, euros, and Japanese yen. He stressed that “all of those will come at different interest rates,” and despite efforts by the Debt Management Office to secure reasonable rates, “the overall level of interest rate borrowing will still be elevated and significant compared to what we’ve seen in the last couple of years.”

A particularly pressing concern for Effiong is the potential need for refinancing in the near to medium term given the “sheer pile of debt that we want to take on.” He warned that if Nigeria’s economy doesn’t significantly improve within the next two to three years, “the net effect of that could be that debt, you know, the overall debt file will be more expensive to service.” He cited past experiences, recalling that in 2018, Nigeria’s debt interest alone cost about ₦1.8 trillion.

Table: Nigeria’s Debt Profile (2020–2024)

Adding to these expert concerns, Professor Simeon Nnah, director-general of the Research Institute for African Development and a professor at the Houdegbe North American University, has raised several critical points regarding the borrowing plan. Professor Nnah criticized the initial announcement about borrowing for infrastructure, noting its lack of detail and the absence of specific projects.

He expressed concern that the National Assembly might not be demanding enough information about which infrastructure projects would benefit from these funds, raising fears that the borrowed money might not be used for genuine development. A major red flag identified by Professor Nnah was the possibility that Nigeria is borrowing for consumption rather than productive infrastructure, a practice he argued is destructive to the economy.

He also highlighted the unsustainable nature of Nigeria’s debt servicing costs, pointing out that in past budgets, these costs have exceeded the budgets for crucial sectors like education and health. This was seen as evidence of borrowing for consumption, as infrastructure projects should ideally generate revenue to help repay the loans. Finally, Professor Nnah suggested that the off-hand nature of the borrowing announcement likely did not inspire confidence among investors.

Civil Society Demands Transparency and Government Response

Prominent civil society voices are also expressing alarm at the scale of the proposed borrowing. Seun Onigbinde, founder of BudgIT, a civic tech organization promoting transparency in public finance, took to social media to question the figures and purpose of the loan. Sharing an image of Nigeria’s external debt stock as of December 31, 2024, from the Debt Management Office, Onigbinde tweeted, “Billion or million? Our total external debt as at December 2024 stands at $45.8bn.” This highlights the existing significant debt burden Nigeria already carries, aligning with the $45,780.45 million USD shown in the DMO data.

He followed this with a stark question, reflecting widespread public concern: “How do you attempt to borrow half of a country’s external debt in a single request? For what purpose?” Onigbinde’s comments underscore the perception that the proposed $24 billion (approx. ₦45 trillion) new loan, relative to the existing $45.8 billion external debt, is an unprecedented and potentially reckless proposition, demanding rigorous justification and transparency.

In a subsequent interview on AIT’s “MONEYLINE WITH NANCY TV,” Seun Onigbinde elaborated on his concerns regarding the borrowing plan. He questioned the necessity and prudence of seeking $21.4 billion in external debt, especially given the substantial increase in government revenue following the removal of fuel subsidies and a rise in oil production. Onigbinde emphasized the inherent risks of external debt, particularly currency devaluation, and stressed that such loans should ideally be directed towards self-liquidating assets or foreign exchange-generating ventures. He highlighted that the previous administration incurred approximately $30 billion in external debt, and its utilization remains largely unclear, raising concerns about accountability for past borrowings.

A central theme in Onigbinde’s interview was the critical lack of transparency surrounding the borrowing plan. He argued that the government should have provided more comprehensive details to the public regarding the intended use of these funds to facilitate proper scrutiny and public engagement. He urged the government to “over-explain” its borrowing intentions to mitigate misinformation and public distrust.

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Onigbinde also criticized the government’s fiscal efficiency and spending habits. He noted that despite increased revenues, there’s no corresponding effort to cut down on unnecessary expenses or demonstrate that the government is sharing the economic burden. He cited instances of questionable spending, such as inflated allocations for palace renovations and boreholes, suggesting a misallocation of resources.

He further contended that the federal government’s budget appears overly focused on local, constituency-type projects rather than impactful, large-scale infrastructure. Onigbinde called for the National Assembly to enhance its role in scrutinizing borrowing plans, advocating for expert consultations and meticulous assessment of each borrowing item to ensure funds are directed towards genuinely productive projects. While acknowledging some positive reforms in taxation and the oil and gas sector, he expressed disappointment that significant progress hadn’t been made in social sectors like education and health, and that social protection measures were inadequately structured or delivered.

Government’s Defense and Economic Strategy

In response to these concerns, Dr. Tope Fasua, Special Advisor to President Tinubu on Economic Affairs, offered a detailed explanation of the government’s borrowing strategy. Speaking on Arise News, Dr. Fasua clarified that the $21.5 billion borrowing request is a planned limit over several years, not a lump sum to be borrowed at once. He stated that for 2025, the planned borrowing is $1.3 billion. These loans are targeted for specific, well-defined projects.

Dr. Fasua addressed concerns about Nigeria’s debt sustainability, stating that the debt-to-GDP ratio was 52% in 2020 and the debt service to revenue ratio was 64% as of December 2024, down from 120% in December 2022. He emphasized the government’s commitment to increasing tax revenue and pointed out that, in dollar terms, Nigeria’s debt fell by $10 billion between 2023 and 2024. He also highlighted that Nigeria has never defaulted on its loans, having recently paid off its IMF debt taken in 2020 for COVID-19 assistance.

Dr. Fasua acknowledged that Nigeria is currently producing 1.4 million barrels of oil per day, falling short of its 2 million barrel target, but noted efforts to ramp up production to 1.8 to 1.9 million barrels. He also stressed the importance of diversifying the economy away from oil dependency, highlighting the potential for increased revenue from property taxes. He further noted that reforms have significantly increased revenue for state governments.

Dr. Fasua defended the borrowing as necessary for expanding the economy and funding crucial infrastructure projects, citing airports and railroads as examples. He argued that these investments are essential for improving Nigeria’s GDP and the overall standard of living. He maintained that Nigeria has one of the best debt management strategies in Africa and that its debt position is better than many other African nations.

Broader Implications and Call for Fiscal Discipline

Civil society groups, such as the Civil Society Legislative Advocacy Centre (CISLAC), caution that while the borrowing plan is structured, the substantial commitment signals significant future obligations. They highlight that even if drawn later, these loans will eventually require servicing, potentially impacting future budgets for essential sectors like health and education. Past experiences with uncompleted road segments and stalled irrigation projects further fuel skepticism about project selection and execution risks, underscoring the need for rigorous feasibility studies and transparent contract awards.

Furthermore, the persistent depreciation of the naira against foreign currencies introduces significant exchange rate volatility. As concessional loans often require counterpart funding in naira, a continued weakening of the local currency could drastically inflate local currency costs for projects, placing additional pressure on state governments. This risk is compounded by highly optimistic revenue projections for the 2025 budget, which are unlikely to be met due to ongoing shortfalls in oil production and global oil prices, inevitably forcing the government to resort to further borrowing.

Table: Comparative Debt Servicing vs. Social Sector Budgets (2024)

The troubling trend in Nigeria’s external debt profile, which has nearly quadrupled between 2015 and 2024, with sharp increases in recent years and rising interest rates, further compounds the debt burden. The most concerning aspect for critics is the apparent absence of accompanying fiscal reforms. The proposed borrowing is not paired with discernible cost-cutting or efficiency-driven spending initiatives designed to curb the pervasive waste for which Nigerian governments are widely known.

Despite these criticisms, the government asserts that the proposed loans will be sourced from development partners such as the World Bank and the African Development Bank, implying more favorable terms. The administration also aims to leverage this initiative to deepen the domestic financial market, attract local dollar investments, strengthen foreign exchange reserves, and help stabilize the exchange rate.

As the National Assembly prepares for committee hearings on President Tinubu’s request in June 2025, the debate surrounding this substantial borrowing plan is set to intensify. Critics are urging the government to demonstrate a concrete commitment to fiscal discipline, including transparent cost-cutting measures, diversification of revenue streams away from volatile oil earnings, and strict debt management policies that tie new borrowing exclusively to high-impact, revenue-generating projects. Without such corrective actions, there is a significant risk that Nigeria could slide into a debt trap, where an ever-increasing share of its revenue is consumed by debt servicing, leaving little for essential public services and infrastructure.