…External debt to hit $45bn as Tinubu seeks fresh N1.767tn loan
By Cyril Ogar
Federal Government plans to allocate a significant portion of its budget to debt servicing between 2025 and 2027, outpacing allocations for capital expenditure.
This is based on the recently approved 2025–2027 Medium-Term Expenditure Framework and Fiscal Strategy Paper, which projects debt servicing costs at N50.39 trillion for the three years, surpassing the N48.93 trillion earmarked for capital expenditures.
The rising debt servicing costs, which are expected to grow by 26.7% from N15.38 trillion in 2025 to N19.49 trillion in 2027, pose concerns about fiscal sustainability.
For context, the FG spent N8.56 trillion on debt servicing in 2023, meaning the 2027 figure represents a staggering 127.7% increase in just four years.
During this period, debt servicing will consume 34.06% of total annual expenditure, while capital expenditure growth remains sluggish, increasing by only 0.18% from N16.48 trillion in 2025 to N16.51 trillion in 2027.
A closer examination of the fiscal projections shows that in 2025, capital expenditure will constitute 34.44% of the total budget, marginally higher than the 32.11% allocated to debt servicing.
However, by 2027, debt servicing is projected to rise to 37.2% of total expenditure, compared to 31.51% for capital projects.
The figures reflect a troubling disparity: while debt servicing costs are increasing rapidly, capital investments remain constrained, potentially exacerbating Nigeria’s infrastructure deficit and hindering economic growth.
Justifying the increase in debt servicing costs, the MTEF/FSP document read: “The provision for debt service will increase significantly due to the size of the country’s debt and higher interest rate on borrowing following several adjustments of the MPR to 27.25% as of September 2024. We will rely on the Debt Management Office ,DMO, to provide a debt service projection once we estimate the financing gap for the 2025 Budget.
“Efforts will be geared towards promoting a debt restructuring strategy to free up resources for increasing government spending on critical infrastructure with the decline in household and private sector spending. Non-commercial long-term facilities with tenors ranging between 10 and 50 years, with a significant moratorium of 5 to 7 years will be explored”.
For 2026, debt servicing will rise slightly by 0.9% to N15.52 trillion, while capital expenditure will dip by 3.28% to N15.94 trillion.
By 2027, the gap widens significantly as debt servicing costs climb by 25.58% to N19.49 trillion, compared to a modest 3.58% increase in capital spending. y
This trend could derail Nigeria’s development goals and deepen its infrastructure challenges.
The document added: “The fiscal space remains constrained by the rising cost of debt servicing, crowding out critical investments in infrastructure, healthcare, and education”.
To finance its fiscal plans, the government intends to borrow an additional N31.24 trillion over three years, potentially driving Nigeria’s debt stock closer to N170 trillion by 2027, up from N134.3 trillion as of June 2024.
Borrowing will primarily address budget deficits, projected at N13.08 trillion in 2025, N12.14 trillion in 2026, and N13.76 trillion in 2027. These deficits highlight the widening gap between revenue and expenditure, despite fiscal reforms such as subsidy removal and exchange rate unification.
Domestic borrowing will dominate the debt mix, contributing N24.98 trillion of the total N31.24 trillion planned borrowing. In 2025, domestic loans will account for 80% of new debt, amounting to N7.37 trillion, while foreign borrowing is pegged at N1.84 trillion.
By 2027, domestic borrowing will rise to N10.59 trillion, with foreign loans increasing modestly to N2.65 trillion.
The Debt Management Office has raised concerns over Nigeria’s ballooning debt stock and servicing costs, warning that the current trajectory poses significant risks to fiscal stability.
Meanwhile, President Bola Tinubu on Tuesday wrote to the National Assembly to approve a fresh N1.767tn as a new external borrowing plan in the 2024 appropriation act.
Tinubu’s request was read by the Speaker of the House of Representatives, Tajudeen Abbass, during plenary on Tuesday.
According to the president, the loan is based on an exchange rate of N800 to $1.
Accordingly, if approved, the loan will be used to part-finance the budget deficit of N9.7 trillion for the 2024 budget.
The president has also forwarded the MTEF/FSP 2025-2027 to parliament and the National Social Investment Programme establishment amendment bill to make the social register the primary tool for the implementation of the federal government’s social welfare programmes.
The Federal Executive Council, had last Thursday approved a $2.2bn external borrowing plan as part of the Federal Government’s 2024 Appropriation Act financing program.
With the latest move to get an additional $2.2bn fresh borrowing plan, Nigeria’s external debt may increase to $45.1bn by the end of 2024.
Nigeria’s total external debt as of the first quarter of this year stood at $42.12bn.
Meanwhile, the cost of servicing Nigeria’s foreign debt has risen by 107.7 per cent to reach N3.8tn, significantly exceeding the projections outlined in the 2024 budget between January and August.
This is contained in the 2025-2027 Medium Term Expenditure Framework and Fiscal Strategy ,MTEF & FSP, published by the Budget Office.
The 2024 budget initially projected foreign debt servicing costs at N1.83tn, but actual spending rose to N3.8tn within the same period, resulting in an increase of N1.97tn, according to the report.
The total amount budgeted for debt servicing during the period—including domestic debt, foreign debt, sinking funds, and interest on FGN bonds for securitized ways and means—was N7.41tn.
However, the government has paid N5.51tn so far, representing 34.4 per cent of the total budgeted amount. This shows the mounting pressure on public finances as debt servicing continues to consume a significant portion of government expenditure.
As of 2024, Nigeria’s national debt has reached alarming levels, significantly increasing under President Bola Tinubu’s administration. By June 2024, Nigeria’s total public debt was reported at N134.2tn, up from N87.3tn in June 2023. This represents a record increase of N46.9tn.
The government has continued to borrow heavily, particularly from both domestic and external sources, despite growing concerns about the sustainability of such debt. Domestic debt alone has reached N71.2tn, while external debt is at N63tn.
The country’s reliance on loans has drawn considerable attention, especially given the rising debt servicing costs. For instance, in the first half of 2024, Nigeria spent $3.58bn servicing foreign debt, marking a nearly 40% increase from 2023.
The devaluation of the naira has further compounded the external debt burden, amplifying its local currency cost.
Debt per capita, which refers to the average amount each Nigerian owes, has surged to approximately N620,000. This is a stark figure considering Nigeria’s large population of over 216 million people. Such debt levels raise concerns about the long-term economic stability of the country and the ability to service these obligations without exacerbating fiscal pressures.
