As President Bola Tinubu prepares to present the 2025 budget, Nigeria’s domestic borrowing has surged by 67%, far exceeding the 2024 target. The Federal Government (FG) borrowed ₦8.93 trillion from domestic sources between January and November 2024, surpassing the ₦6 trillion planned for the entire year. If this trend continues, borrowing could hit ₦10 trillion by year-end.
The 2025 budget deficit, estimated at ₦9.22 trillion, will be financed through domestic and external borrowings, privatization proceeds, and multilateral project-tied loans. This represents an 18% increase from the ₦7.8 trillion deficit in 2024. With domestic borrowing as the primary funding source, concerns about Nigeria’s rising debt stock continue to mount.
In the first half of 2024 (H1’24), Nigeria’s domestic debt stock soared to ₦66.96 trillion, up 38.6% from ₦48.31 trillion in H1’23. Borrowings included ₦11.8 trillion through Treasury Bills (NTBs), which accounted for 17.64% of total borrowing, while bonds constituted 78.13%, rising from ₦41.7 trillion in H1’23 to ₦52.3 trillion in H1’24. Sukuk Bonds and Savings Bonds also recorded significant growth.
This borrowing spree was fueled by the Central Bank of Nigeria’s (CBN) hawkish monetary policy. The Monetary Policy Rate (MPR) was raised by 875 basis points, climbing from 18.75% in February to 27.5% in November. As a result, interest rates on 364-day NTBs reached 22.93% in November, up from 12% at the start of the year, while FGN Savings Bonds offered rates as high as 17.48% in December.
Economic analysts warn of dire consequences if the borrowing trend persists. David Adonri, Executive Vice Chairman of Highcap Securities Limited, noted that Nigeria is sliding into a “debt trap,” relying on new loans to service existing obligations. He highlighted the crowding-out effect on private sector lending, inflationary pressures, and the strain on monetary policy as public debt expands.
Victor Chiazor, Head of Research at FSL Securities Limited, echoed these concerns, pointing to elevated borrowing costs that discourage private sector growth. He noted that high government spending, combined with increased naira liquidity, is placing additional pressure on the exchange rate.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, emphasized the need for sustainable borrowing to avoid overheating the economy. He stressed that while borrowing to fund deficits is necessary, over-reliance on domestic credit markets risks stifling private sector access to funding.
Former Chartered Institute of Stockbrokers President, Olatunde Amolegbe, argued that borrowing is justifiable for infrastructure development but criticized the use of loans for recurrent expenditures. He cautioned that unsustainable debt levels could undermine long-term economic stability.
With a projected total expenditure of ₦27.5 trillion and revenue of ₦18.32 trillion, the 2025 budget will test the FG’s fiscal discipline. While high interest rates have attracted domestic investors, the debt burden is rising at an unsustainable pace. Analysts stress the importance of channeling borrowed funds into productive ventures to foster economic growth and reduce the strain on public finances.
As Nigeria grapples with its mounting debt, the FG must strike a delicate balance between funding its budget and maintaining debt sustainability, lest the economy falter under the weight of its obligations.
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