Nigeria is on the brink of increasing its foreign debt to approximately $51 billion following President Bola Tinubu’s request to the Senate for approval to borrow an additional $7.8 billion and €100 million as part of the 2022-2024 borrowing plan.
Financial analysts have expressed concerns about the official reasons given for this borrowing, suggesting that it may primarily serve as a bridging loan to address the country’s current balance of payment crisis.
As of June 2023, Nigeria’s foreign debt stood at $43.2 billion, with domestic debt amounting to N54.1 trillion, resulting in a total public debt of N113.4 trillion. With the impending borrowing and the depreciation of the naira, the total public debt is projected to reach N130 trillion.
In a letter addressed to the Senate, President Tinubu explained that the request is based on approval granted during a Federal Executive Council meeting in May 2023. The borrowed funds are intended for various projects spanning infrastructure, agriculture, health, education, water supply, security, employment, financial management reforms, and more, totaling $7,864,508,559 and €100 million.
Tinubu’s request also cited interest from the African Development Bank (AfDB) and the World Bank Group (WBG) to assist Nigeria with economic challenges following the removal of fuel subsidies. AfDB and WBG have offered $1 billion and $2 billion, respectively, in addition to the approved 2022-2024 external borrowing plan.
The President emphasized that these funds would be utilized to finance key infrastructure projects, including power, railways, and healthcare, among others. He stressed the importance of presenting a clear vision to motivate people to make sacrifices for the nation’s development.
However, some financial experts have voiced concerns about Nigeria’s rising debt profile. They argue that the new borrowing may be more about addressing the balance of payment crisis than following the 2022-2024 borrowing plan. They recommend negotiations with creditors to reschedule outstanding trade and multilateral debts as an urgent priority. Nonetheless, others see this borrowing as a necessary step to enhance dollar liquidity in the foreign exchange market, stabilize exchange rates, and reduce further devaluation of the naira.
As Nigeria grapples with economic challenges and aims to restore equilibrium, government initiatives may be seen as reactionary responses to address the nation’s complex financial situation, including inadequate foreign reserves, high public debt, low oil revenue, inflation, and weak purchasing power. Experts recommend a comprehensive adjustment program to realign the economy, restore equilibrium, and address these challenges.
