- The Federal Government plans to borrow N31.24 trillion in three years
- The government will spend more on debt servicing than capital expenditure
- Fresh borrowing from foreign and domestic sources will increase Nigeria’s debt stock to N165 trillion in three years
The Federal Government is set to borrow an additional N31.24 trillion to fund expenditures within the next three years.
The new borrowing will increase Nigeria’s debt stock from N134.3 trillion as of June 2024 to N165.54 trillion by 2027.
This is according to the Federal Government’s recently approved 2025-2027 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF-FSP).
The document also shows that the government plans to spend more on debt servicing than capital expenditure in the three years between 2025 and 2027, raising concerns about debt sustainability.
The government’s planned borrowing will be channelled primarily to financing budget deficits projected to be N13.08 trillion in 2025, N12.14 trillion in 2026 and N13.76 trillion in 2027, as well as other expenditures. This will result in Nigeria’s debt-to-revenue ratio being further pushed to unsustainable levels.
The budget deficits will represent 3.87 per cent of Nigeria’s Gross Domestic Product (GDP) in 2025 and 3.01 per cent of the GDP by 2027.
Breakdown of planned borrowing
Amid concerns about rising loan obligations, a breakdown of the N31.24 trillion fresh borrowing shows that the government plans to borrow N9.22 trillion in 2025, N8.78 trillion in 2026 and N13.24 trillion by 2027.
By source of borrowing, domestic borrowing will account for N24.98 trillion of the N31.24 trillion, while foreign borrowing will contribute N6.25 trillion.
For the 2025 fiscal year, domestic borrowing will be N7.37 trillion, which is 80 per cent of the borrowing projection for the year, while foreign borrowing will be N1.84 trillion.
In 2026, domestic borrowing is pegged at N8.78 trillion, while foreign loans will be N1.76 trillion. The figures will increase to N10.59 trillion for domestic borrowing and N2.65 trillion for foreign loans by 2027.
Spending on debt servicing more than capital expenditure
The MTEF document further reveals that Nigeria will spend N50.39 trillion on debt servicing between 2025 and 2027. Also, more funding will go into recurrent expenditures such as salaries and personnel costs. The amount to be spent on debt servicing is higher than the N48.93 trillion projected to be spent on capital expenditures.
This has become a troubling trend among successive governments and worrisome given that the Federal Government spent $1.36 billion on debt service in the first half of 2024.
Capital expenditures are crucial for infrastructural and economic development and refer to spending on such critical sectors as health, education, roads and others
According to the document, debt servicing will increase from N15.38 trillion in 2025 to N19.49 trillion in 2027, representing a 26.7 per cent increase over three years.
This shows Nigeria’s burgeoning debt profile and raises concerns about debt sustainability. Between 2019 and 2024, the government spent $15.55 billion to service debts. In 2023 alone, the Federal Government spent N8.56 trillion on debt servicing, of which N5.73 trillion was spent in nine months of 2023. Going by the current projections, spending on debt servicing would have more than doubled to N19.49 trillion, which is a 127.7 per cent increase in just four years. Between 2025 and 2027, 34.06 per cent of total annual expenditures will go to debt servicing.
Spending on capital expenditure stalls
The MTEF document shows that capital expenditures will increase by only 0.18 per cent, from N16.48 trillion in 2025 to N16.51 trillion in 2027. On the other hand, the government’s spending on debt servicing will increase by 2.98 per cent in three years.
In 2025, capital expenditure will account for 34.44 per cent of the total spending, a little higher than the 32.11 per cent allocated to debt servicing.
By 2027, capital expenditures will account for 31.51 per cent of the entire spending, while debt servicing will increase to 37.2 per cent.
In 2025, N16.48 trillion will be allocated to capital expenditures, while debt servicing will cost N15.38 trillion. For the 2026 fiscal year, capital expenditures will reduce by 3.28 per cent to N15.94 trillion, while debt servicing will increase by 0.9 per cent to N15.52 trillion.
By 2027, capital expenditures will increase slightly by 3.58 per cent to N16.51 trillion, while debt servicing will soar by 25.58 per cent to N19.49 trillion.
According to economists, this trend of spending more on debt servicing than capital expenditure will hurt Nigeria’s infrastructure development and economic growth.
Nigeria’s external debt rose by N22.77trn within 10 months of Tinubu’s administration
Meanwhile, TheRadar reported that as of March 2024, Nigeria’s external debt stood at N56.02 trillion, a N22.77 trillion increase from the N33.25 trillion it was at the end of President Muhammadu Buhari’s administration.
According to data from the Debt Management Office (DMO), aggregated and posted by StatiSense on X (formerly Twitter) on August 30, the figure was achieved in just 10 months of President Bola Tinubu’s administration.
