Concerns As President Tinubu Seeks Senate’s Approval For Fresh Loan

President Bola Tinubu has submitted a request to the National Assembly for authorization to secure an external loan of $2.209 billion (equivalent to N1.767 trillion), as outlined in the 2024 Appropriation Act.

This move has raised concerns among experts regarding the potential for increasing the nation’s debt burden.

The President indicated that this request is integral to Nigeria’s budgetary financing strategy, aimed at mitigating part of the N9.17 trillion fiscal deficit projected for the 2024 budget.

Additionally, President Tinubu has presented the 2025–2027 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), which received approval from the Federal Executive Council (FEC) on November 10, 2024, to the Senate for consideration.

The MTEF/FSP proposal, which emphasizes the need for prompt approval, has been assigned to the Senate Committees on Finance and National and Economic Planning for timely reporting.

In his correspondence, addressed to Senate President Senator Godswill Akpabio and House of Representatives Speaker Tajudeen Abbas during a plenary session, the President noted that the request aligns with the stipulations of Sections 21(1) and 27(1) of the Debt Management Office (DMO) Establishment Act of 2003. The borrowing initiative has already received the green light from the FEC.

The letter also detailed the terms and conditions for the issuance of Eurobonds in the international capital market to secure the necessary funds.

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President Tinubu has empowered the Minister of Finance and Coordinating Minister of the Economy, along with the DMO, to undertake all required actions to implement the plan following the National Assembly’s approval.

President Tinubu articulated that the objective of the proposed borrowing is to address the budget deficit for 2024, which forms a component of Nigeria’s comprehensive fiscal strategy. He noted that the funds would be procured through Eurobonds or other external borrowing mechanisms.

The President urged for prompt legislative action, highlighting the necessity of a timely resolution to facilitate the implementation of the borrowing initiative.

Senator Akpabio has referred the issue to the Committee on Local and Foreign Debts, under the leadership of Senator Aliyu Wamako (APC, Sokoto), with a directive to provide a report within 24 hours.

In response to President Tinubu’s recent request for external loans, David Adonri, the Executive Vice Chairman at Highcap Securities Limited, remarked that the Federal Government of Nigeria is already ensnared in a debt trap, necessitating new foreign debt to manage existing obligations.

‘’FGN also requires new foreign debt to finance import content of it’s budget. FGN is now in a quagmire as sinking further in debt worsens its precarious situation. Yet, without additional foreign debt, it cannot survive.

‘‘Although, I don’t know the structure of the new debt, its long-run effect is likely to be devastating for the economy”.

THERE IS NEED TO SPECIFY HOW LOAN WILL BE REPAID
Also commenting, Prof Uche Uwaleke, President, Association of Capital Market Academics of Nigeria, ACMAN, said: “The request is part of the borrowing plan contained in the 2024 budget and so in order.

‘‘However, there is a need to specify the projects to be financed, whether or not they are self-liquidating and how the loan will be repaid. This is necessary considering the country’s already huge debt burden.

‘‘Another concern I have is that the emphasis seems to be on Eurobonds which are non-concessional and very costly. I think more attention should be on the Sovereign Sukuk which are project-tied and a lot cheaper”.

Clifford Egbomeade, a Public Affairs Analyst and Communications expert, commented on President Bola Tinubu’s proposal for a new external loan of N1.77 trillion ($2.209 billion). He indicated that this request highlights Nigeria’s persistent challenges with fiscal deficits, as the loan is intended to address a portion of the N9.7 trillion gap in the 2024 budget.

Egbomeade emphasized that while external borrowing may offer temporary relief from budgetary pressures, the escalating costs of debt servicing—projected at $3.58 billion in the first nine months of 2024, representing a 39.77% increase from 2023—demonstrate the growing burden on the nation’s finances.

Additionally, he pointed out that the devaluation of the naira has intensified the real burden of these debts, rendering external loans more expensive to repay in the local currency.

On the economic impact of the new loan, he said: “It will largely depend on how effectively it is utilized. If the funds are channeled into productive sectors like infrastructure, healthcare, or education, they could stimulate economic growth, create jobs, and improve public services.

“However, Nigeria’s history of fiscal mismanagement raises concerns about transparency and accountability in loan utilization.

“Without proper oversight, the loan could contribute to wasteful spending or fail to deliver the intended developmental outcomes, leaving the country burdened with even higher debt.

“Moreover, Nigeria’s over-reliance on oil revenue and federal allocations highlights the urgent need for structural reforms to diversify revenue sources. As 32 states relied on FAAC allocations for at least 55% of their total revenue in 2023, and 14 states depended on these funds for over 70%, the country’s fiscal sustainability remains precarious.

“To mitigate the risks associated with rising debt, the government must prioritize boosting internally generated revenue, restructuring existing loans, and adopting policies that ensure efficient debt utilization. Without these measures, further borrowing could deepen Nigeria’s economic challenges rather than alleviate them.”