Borrowing: Are we building the future or sabotaging it?
The Senate recently approved the Executive’s request to secure a combined $21.5 billion in foreign loans, alongside other borrowings from the domestic capital market, underscoring the gravity of the country’s financial commitments. For perspective, Dangote Refinery was constructed at a cost of around $20 billion, while the approved amount represents several multiples of the 2025 national budget, estimated at ₦50 trillion.
Further approvals include issuing local bonds worth ₦757.9 billion to clear pension arrears and $2 billion in foreign currency-denominated loans to be raised on the Nigerian Stock Exchange. The original loan request, submitted by the President to the National Assembly on 27 May 2025, received Senate approval in under two months—a record turnaround that has prompted speculation about a political environment already warming up for the 2027 elections, especially with talks of coalition-building underway.
Concerns about Nigeria’s mounting debt stock persist. Current figures put the debt at ₦121 trillion, with an external component equivalent to $43 billion. The debt-to-GDP ratio now stands at 39.4 per cent, close to the government’s 40 per cent ceiling and below the 55 per cent limit recommended by the World Bank and IMF. T
The pressing issue remains debt sustainability, with more than 80 per cent of federal revenue allocated to servicing existing obligations. Many fear a looming debt overhang that could eclipse the burden that former Finance Minister Ngozi Okonjo-Iweala successfully negotiated away during the Obasanjo administration, with serious implications for fiscal management.
Prominent opposition figures have pointed out that, in just two years, this administration’s borrowings may already exceed the combined debts of previous governments since the return to democracy.
While officials argue that the loan disbursements will be staggered over the medium term, these funds are subject to lender protocols and conditional release schedules. Proponents also maintain that all borrowings are captured within the Medium-Term Expenditure Framework, the Fiscal Strategy Paper, and the 2025 budget, framing the approvals as routine. Yet transparency in the process remains wanting.
Domestic borrowing of almost ₦800 billion will inevitably pressure the private sector, which should drive economic growth. Such extensive government borrowing risks crowding out private investment and driving interest rates higher in an inflationary environment, where rates still hover at a burdensome 22.2 per cent, albeit reduced from over 34 per cent following an economic rebasing.
The decision to approve $2 billion in foreign currency loans from the domestic market has raised further questions about the naira’s status as legal tender. Advocates argue that the measure could deepen the capital market, attract diaspora inflows, boost foreign investment, ease pressure on external reserves, and support exchange rate stability.
A separate but pressing matter concerns pension arrears. It is deeply troubling that those who dedicated the prime years of their lives to public service are left without timely access to their entitlements, often facing financial hardship and shortened life expectancy.
The contributory pension scheme, if implemented with integrity, should have safeguarded them. Instead, repeated diversions of pension funds for other fiscal needs have eroded trust and jeopardised the scheme’s sustainability. Greater discipline in borrowing and management of pension funds is imperative.
Scepticism lingers over whether adequate scrutiny accompanied these approvals. Although the loans are earmarked for capital projects and human capacity development in line with the Fiscal Responsibility Act, publicly available details remain sparse. There is also unease about potential misapplication, with intergenerational equity at stake since much of the repayment will fall to future administrations and citizens.
Given these realities, those responsible must ensure maximum value for the nation from these loans. Fiscal prudence and transparency are critical to avoid compounding debt challenges and to secure a sustainable economic path for future generations.