Nigeria’s public debt is set to exceed N180 trillion, following President Bola Tinubu’s request to the National Assembly, seeking approval for additional external and domestic loans totalling N34.15 trillion.

According to the letters, President Tinubu is seeking approval for a new external borrowing plan of over $21.5 billion, which translates to N33.39 trillion at the official exchange rate of N1,590 per dollar.

The President is also seeking approval of a domestic bond issuance of N757.9 billion to settle outstanding pension liabilities.

In the separate letters to the Senate and House of Representatives, read at yesterday’s plenary by the President of the Senate, Senator Godswill Akpabio, and Speaker of the House, Tajudeen Abbas, President Tinubu highlighted the strategic significance of the 2025–2026 borrowing plan, noting that it spanned key sectors of the economy.

Tinubu said: “The 2025–2026 borrowing plan covers all sectors, with specific emphasis on infrastructure, agriculture, health, education, water supply, growth, security, and employment generation, as well as financial and monetary reforms, among others.”

He explained that the total facility sought under the external borrowing plan includes USD 21,543,647,912; EUR 2,193,856,324.54; and 15 billion Japanese Yen, in addition to a grant of 65 million EUR.

Tinubu, who noted that the proposed borrowing is crucial, in light of removal of fuel subsidy and its economic implications, said: “In light of the significant infrastructure deficit in the country and paucity of financial resources needed to address this gap, amid declining domestic demand, it has become essential to pursue prudent economic borrowing to close the financial shortfall.”

He assured lawmakers that the proposed funds will be channeled into critical infrastructure projects, especially in the areas of railways, healthcare, and nationwide development programmes across all 36 states and the Federal Capital Territory, FCT.

“This initiative aims to generate employment, promote skill acquisition, foster entrepreneurship, reduce poverty, and enhance food security, as well as improve the livelihoods of Nigerians,” he emphasized.

In another letter, President Tinubu sought NASS’ approval for the issuance of Federal Government bonds in the domestic market to settle accrued pension liabilities under the Contributory Pension Scheme, CPS, amounting to N757,983,246,572.
The President, who cited the Pension Reform Act 2014, noted that the government had been unable to comply with some statutory pension obligations due to revenue challenges, leading to a buildup of arrears and increasing hardship for retirees.

He said: “The Senate, House of Representatives are invited to note that the Federal Government has not been compliant with the implementation of the above provisions of the PRA 2014 over the years due to revenue challenges leading to the accumulation of pension arrears with the attendant suffering of retirees.”

Tinubu noted that the proposal to issue bonds for the settlement of the liabilities had received approval from the Federal Executive Council, FEC, in its meeting of February 4, 2025.

According to him, settling the pension arrears will improve retirees’ welfare, boost confidence in the pension system and inject liquidity into the economy.

The letters read further: “It will enable the Federal Government of Nigeria meet obligations under the CPS and restore confidence in the pension industry.

“It will also ensure positive welfare, even for the retirees, as this will enable them to meet their basic needs, improve health and avoid untimely death.”

President Tinubu, who urged the National Assembly to give timely approval, assured of his administration’s commitment to transparency and accountability.

While the Senate President referred the request to the committee on local debts for further legislative action, Speaker of the House of Representatives referred same to the committees on national planning and economic development, as well as pensions for further action.

The committees are to report to both arms of the National Assembly for further legislative action.

Rising public debt

Nigeria’s total public debt rose by 48.6 per cent to N144.66 trillion in 2024, from N97.34 trillion in 2023, with the Federal Government accounting for 95 per cent or N137.28 trillion.

Consequently, the additional borrowing, when combined with the N10.85 trillion borrowed from domestic investors from January to April this year, indicates an increase in total public debt to over N180 trillion.

Debt Service-to-Revenue deteriorates to 131%

Meanwhile, the Federal Government’s debt service-to-revenue ratio, a critical measure of ability to repay loans, deteriorated to 131 per cent in the first two months of the year, January to February (2M’25), from 118 per cent in the corresponding period of 2024.

Rising debt service spending

Vanguard’s analysis of data on fiscal activities of the Federal Government in the monthly economic report of the Central Bank of Nigeria, CBN, for January and February, showed that the FG spent N1.399 trillion on debt service in 2M’25, up by 25 per cent YoY from N1.117 trillion in 2M’24.

It also recorded a 13 per cent YoY increase in revenue to N1.067 trillion in 2M’25, from N943.4 billion in 2M’24.
Consequently, the FG’s debt service-to-revenue rose to 131 per cent in the 2M’25, from 118 per cent in 2M’24.
The deterioration in the debt service-to-revenue will persist, given the additional borrowing sought by the President.
Consequently, economy stakeholders expressed concern over the implication of the additional borrowing for the FG’s debt service-to-revenue ratio.

While noting that the magnitude of the new loan is too large, representing almost half of the total external debt of $45.8 billion as at December 2024, while total external debt currently accounts for roughly 49% of public debt, and a sizable proportion of debt service, Tunde Abidoye, Head of Equity Research, FBNQuest Merchant Bank, said: “I believe some caution is warranted, given the potential rise in debt service cost, and the inherent exchange rate risks associated with foreign denominated borrowings. This also has implications for the fiscal space.”

Capacity to repay should be a major concern — EX-CIS President

On his part, Olatunde Amolegbe, former President, Chartered Institute of Stockbroker, CIS, said: “ It is well known that the budget deficit projected for 2025 needed to be covered primarily through a combination of external and domestic borrowing, so this new request is probably in fulfillment of that.

“Borrowings from multilateral bodies typically come at relatively variable terms relative to commercial borrowing and this is expected to be the case for this new $21.5 billion loan.

‘’The N757.9 million in domestic pension bond, to used to fulfill government’s obligation regarding pension liabilities and should ensure that pensioners are able to get their entitlements immediately, while government covers the repayment and interest obligations over time.

“This is not the first pension bond that will be issued as some had been issued by the previous administration and I figure it won’t be the last. For me, borrowing in itself is not a problem as long as the capacity to meet up with repayment obligations, as at when due is there. It is, however, important that we pay particular attention to application and usage of the loans.”

Borrowing could be fruitful if tied to reforms, projects —Egbomeade

Reacting to the proposed borrowings, Clifford Egbomeade, Economic analyst and communications expert said: “President Tinubu’s request to borrow $21.5 billion externally and issue a domestic bond of N757.9 billion to settle pension liabilities is a significant move that could have both short and long-term implications.

‘’On one hand, settling outstanding pension obligations can provide immediate relief for retirees and help stimulate domestic consumption, which supports economic activity. Similarly, if the external loans are concessional and targeted at productive sectors like agriculture, job creation, and infrastructure, they could contribute to broader economic development.

“That said, Nigeria’s current debt profile is already high, with total public debt at N144.7 trillion (about $94.2 billion) as of December 2024. Debt servicing costs remain a major concern, taking up a large share of government revenue.

“So, while these measures could help address urgent social and economic needs, their success will largely depend on how efficiently the funds are used and whether they are tied to reforms that boost revenue and reduce waste.
‘’Careful planning and transparency will be key to ensuring these efforts strengthen the economy, rather than deepen fiscal strain”.

[Vanguard]