Nigeria faces a looming debt crisis as recent approvals for fresh borrowings could propel the nation’s total debt to surpass N107.38 trillion.
The approval initiated by President Bola Tinubu’s administration includes plans to borrow $7.8 billion and €100 million as part of the Federal Government’s 2022-2024 borrowing strategy.
These funds are earmarked to finance critical sectors such as infrastructure, health, education, agriculture, and security, among others.
Tinubu emphasized the necessity of foreign loans to bridge financial gaps and restore economic stability in light of recent reforms, notably the removal of fuel subsidies.
Furthermore, additional financial support from the African Development Bank and the World Bank, totaling $1 billion and $2 billion respectively, underscores Nigeria’s urgent need for economic revitalization amidst challenging times.
As of September 2023, Nigeria’s total debt stood at N87.91 trillion, comprising N31.98 trillion in external debt and N55.93 trillion in domestic debt.
The recent approvals, if fully implemented, could raise the debt burden by at least 22.15%, reaching the projected N107.38 trillion mark by 2024.
Notably, Nigeria aims to maintain a debt-to-GDP ratio of 40%, yet projections indicate this figure may soar to 53.06%, signaling potential fiscal strain.
The utilization of Ways and Means advances, a provision allowing short-term borrowing from the Central Bank, further complicates the debt landscape.
While the government emphasizes economic reforms and infrastructure development, concerns linger over the sustainability of Nigeria’s borrowing trajectory.
Analysts caution that securing and implementing these loans may prove challenging, as evidenced by delays in previous loan disbursements.
Amidst growing debt burdens, Finance Minister Wale Edun acknowledges the need for fiscal prudence, advocating for reduced reliance on borrowing to stabilize the economy.
As Nigeria navigates its financial landscape, the balance between development aspirations and fiscal sustainability remains a critical challenge.