…Say Nigeria approaching harmful
thresholds in key debt sustainability indicators
The Federal Authorities has projected plans to lift about N10.98 trillion from overseas borrowing between 2026 and 2028, in accordance with figures obtained from the Price range Workplace of the Federation.
The borrowing plan reveals that the federal government intends to supply N3.57 trillion in 2026, improve overseas loans to N4.23 trillion in 2027, earlier than scaling all the way down to N3.16 trillion in 2028.
The cumulative quantity over the three-year interval stands at roughly N10.96 trillion.
The projections are a part of the Federal Authorities’s medium-term fiscal framework, which outlines funding methods for price range deficits amid persistent income shortfalls and rising expenditure pressures.
“WHILE GDP GREW BY AROUND FOUR PERCENT, THE COUNTRY’S DEBT STOCK EXPANDED BY OVER 22 PERCENT IN THE PAST YEAR.THAT KIND OF IMBALANCE IS UNSUSTAINABLE.”
The doc gives steering to Ministries, Departments and Companies on expenditure ceilings and financing assumptions forward of the preparation of annual budgets.
In accordance with the doc, exterior borrowing is anticipated to enhance home financing as the federal government seeks to stability deficit funding whereas managing debt sustainability dangers.
Multilateral and bilateral loans are anticipated to account for a good portion of the overseas borrowing, given their comparatively decrease rates of interest and longer reimbursement tenures in contrast with industrial loans.
The deliberate rise in overseas borrowing in 2027 suggests elevated funding wants, doubtlessly linked to increased capital expenditure commitments and the refinancing of present obligations.
Nevertheless, the decline projected for 2028 signifies a potential effort to average publicity to exterior debt and scale back vulnerability to trade fee fluctuations.
Nigeria’s debt profile has more and more come below scrutiny as debt service prices proceed to eat a big share of presidency revenues.
Lately, the Federal Authorities has relied closely on borrowing to bridge the hole between income and expenditure, pushed by weak oil earnings, tax assortment challenges and rising recurrent prices.
Whereas overseas loans are typically thought of cheaper than home borrowing, analysts have warned that extreme reliance on exterior financing might heighten fiscal dangers, particularly within the occasion of forex depreciation or tightening international monetary situations.
The Price range Workplace has repeatedly maintained that the federal government’s borrowing technique prioritises concessional funding and initiatives with clear financial returns.
It has additionally pressured the significance of bettering income mobilisation to cut back dependence on debt financing over the medium time period.
The overseas borrowing projections contained within the Price range Name Round will kind a part of the assumptions underpinning the 2026–2028 Medium-Time period Expenditure Framework and the annual price range proposals to be submitted to the Nationwide Meeting.
The Chief Economist at SPM Professionals, Paul Alaje, warned that Nigeria’s rising debt profile was already exerting extreme strain on authorities revenues and crowding out non-public sector investments.
He pressured that the nation was approaching harmful thresholds in key debt sustainability indicators.
“If borrowing continues at this tempo, and revenues don’t enhance considerably, we would return to spending as much as 90 % of presidency earnings simply on debt service,” he cautioned.
He defined that whereas the debt-to-GDP ratio of 39.4 % stays inside authorized limits, the debt service-to-revenue ratio, which is at present round 70 to 74 %, is greater than double the suitable benchmark of 33 %.
“In sensible phrases,” he defined, “for each N100 Nigeria earns, between N68 and N70 goes into debt servicing. That leaves little room for funding training, healthcare, or infrastructure.”
One other worrying signal, in accordance with Alaje, is the hole between the financial system’s progress and the expansion of public debt.
“Whereas GDP grew by round 4 %, the nation’s debt inventory expanded by over 22 % prior to now yr. That sort of imbalance is unsustainable,” he mentioned.
He argued that if borrowing actually translated into broad-based improvement, Nigerians would see infrastructure initiatives unfold throughout the nation, not simply in Abuja or elements of Lagos.
The Registrar of the Chartered Institute of Finance and Management, Nigeria, Godwin Eohoi, famous the dangers in each home and overseas borrowings.
Domestically, he famous, authorities debt devices similar to bonds and treasury payments crowd out non-public sector entry to finance, as banks desire lending to authorities at near-zero danger.
This, he mentioned, stifles entrepreneurship and job creation.
Externally, he pointed to Nigeria’s risky trade fee as a serious danger issue.
“Two years in the past, the official trade fee was under N500 to the greenback. Immediately, it’s round N1,500. That’s a 300 % depreciation. For a rustic whose loans are denominated in overseas forex, that’s harmful,” Eohoi warned.
He prompt that Nigeria might keep away from extreme borrowing if it optimised income assortment, minimize down on the price of governance, and restructured its budgetary priorities.
He really helpful shifting the price range formulation from the present heavy tilt in direction of recurrent spending to a 60:40 cut up in favour of capital expenditure.
He known as for larger transparency in public spending, noting that “some budgeted objects are overpriced, elevating questions on prudence.”
He argued that with improved income mobilization with out overtaxing the poor, Nigeria might meet its financing wants with out resorting to debt.
Responding to comparisons with superior economies, he dismissed arguments that Nigeria might borrow like the US.
“America borrows in its personal forex, the greenback, which is a world reserve forex. Nigeria can not print naira to pay worldwide collectors. If we try that, the financial system will collapse. We should get severe about our debt,” he mentioned.
Whereas acknowledging that some borrowing could also be obligatory for infrastructure, Eohoi insisted that unchecked accumulation of debt would mortgage Nigeria’s future.
“If Nigeria reaches N300tn in debt with out corresponding income progress, the nation dangers falling again to spending practically all of its income on debt servicing. That can worsen poverty, starvation, and unemployment,” he warned.
