More money, more loans: Inside Nigeria’s endless borrowing cycle

More money, more loans: Inside Nigeria’s endless borrowing cycle

When President Bola Tinubu declared in September 2025 that Nigeria had met its revenue target ahead of schedule and would no longer rely on borrowing to fund its budget, it appeared to signal a turning point in the country’s fiscal journey. But months later, official figures tell a different story, SAMI TUNJI reports

Addressing stakeholders of The Buhari Organisation who visited him at the Presidential Villa in Abuja in September 2025, President Bola Tinubu said that Nigeria had met its revenue target for 2025 ahead of schedule and would no longer rely on borrowing to fund its budget.

“Today, I can stand here before you to brag: Nigeria is not borrowing. We have met our revenue target for the year, and we met it in August,” Tinubu told the delegation.

Also, earlier in March 2025, the immediate past Minister of Finance, Wale Edun, stated that, rather than accumulating more debt, the government is prioritising alternative funding sources, including revenue generation, concessional loans, and strategic investments.

He noted that the administration had reached a stage where resource optimisation takes precedence, leading to a shift away from borrowing from commercial markets.

“We are at that optimisation stage, where there is less focus on borrowing, particularly from the commercial markets, which is quite high. We are focusing more on optimising assets and attracting private sector investment, whether domestic or foreign,” Edun said at the opening of a two-day high-level interactive session in Abuja.

However, this was not the case, as Nigeria’s public finances are entering a troubling phase in which rising revenue is no longer enough to prevent further borrowing amid weak capital spending.

Debt climbs as revenue rises

The public finance story is no longer simply that Nigeria does not earn enough. It is now that the country is earning more, yet it is still borrowing heavily because expenditure, deductions, and debt obligations are expanding almost as fast as revenue.

The latest DMO data put Nigeria’s total public debt at N159.28tn at the end of 2025, rising by N14.61tn, or 10.10 per cent, from N144.67tn recorded at the end of 2024. The increase was slower than the sharp jump recorded in 2024, when the debt stock rose by N47.32tn, or 48.62 per cent, from N97.34tn in 2023. In 2023, the debt stock had more than doubled from N46.25tn in 2022, rising by N51.09tn, or 110.47 per cent, largely reflecting the securitisation of the Federal Government’s Ways and Means advances and the naira impact of exchange-rate changes. DMO data showed that public debt stood at N46.25tn in 2022, N97.34tn in 2023, N144.67tn in 2024 and N159.28tn in 2025.

A breakdown of the 2025 debt stock showed that the Federal Government accounted for the largest portion of the burden. Federal external debt stood at N66.27tn, while federal domestic debt stood at N80.49tn, bringing the Federal Government’s total to N146.76tn, or about 92.14 per cent of the total public debt stock. States and the FCT owed N8.16tn externally and N4.36tn domestically, bringing their combined debt to N12.52tn, or 7.86 per cent of the total.

The year-on-year movement also showed that the fresh pressure in 2025 came more from domestic borrowing than external debt. Total external debt rose from N70.29tn in 2024 to N74.43tn in 2025, an increase of N4.14tn, or 5.90 per cent. In contrast, domestic debt climbed from N74.38tn to N84.85tn, rising by N10.47tn, or 14.08 per cent. This means domestic debt accounted for about 71.66 per cent of the total increase in public debt between 2024 and 2025.

The Federal Government’s domestic debt rose from N70.41tn in 2024 to N80.49tn in 2025, an increase of N10.08tn, or 14.32 per cent, while its external debt increased by N3.35tn, or 5.33 per cent, from N62.92tn to N66.27tn. For states and the FCT, external debt rose from N7.37tn to N8.16tn, while domestic debt increased from N3.97tn to N4.36tn.

This means that even after two years of reforms designed to raise revenue, remove fuel subsidy pressure and improve fiscal transparency, the debt stock continued to rise in absolute terms. The World Bank noted that Nigeria’s debt-to-GDP ratio was projected to fall from 42.5 per cent in 2024 to 39.8 per cent in 2025, helped by growth, stronger revenue and exchange rate appreciation. But that improvement does not erase the fact that the naira value of debt remains high and the government still needs new borrowing to fund its budget.

Revenue has improved sharply. Gross FAAC revenue rose to N37.44tn in 2025 from N29.45tn in 2024, up from N17.08tn in 2023, highlighting a sharp post-reform surge in government earnings despite persistent fiscal pressures. Also, non-oil and gas revenue increased from N16.41tn in 2024 to N22.87tn in 2025, while CIT, SDT and CGT rose from N6.33tn to N10.22tn. VAT also increased from N6.72tn to N8.61tn. Customs revenue rose to N4.04tn.

The PUNCH further observed that, while revenue growth has outpaced debt in percentage terms, the debt burden is still rising more quickly in absolute terms. Gross FAAC revenue increased from N17.08tn in 2023 to N37.44tn in 2025, a growth of about 119 per cent, while total public debt rose from N97.34tn to N159.28tn over the same period, up by about 64 per cent. However, in cash terms, debt expanded by N61.94tn compared to a N20.36tn increase in revenue. This indicates that despite stronger earnings, the government’s borrowing continues to outstrip revenue gains in real monetary terms.

Despite an increase of about N61.94tn in debt value between 2023 and 2025, the Federal Government has no plans to slow down on borrowing. President Bola Tinubu signed a N68.32tn 2026 Appropriation Act into law in April 2026. The approved budget allocates about N15.8tn to debt servicing, N15.4tn to recurrent expenditure, and N32.2tn to capital spending, with statutory transfers of N4.799tn. The budget expansion significantly widened the financing gap, necessitating a sharp upward revision to borrowing. The PUNCH earlier reported that the Federal Government’s borrowing plan for 2026 rose to N29.20tn, up from an earlier projection of N17.89tn. This means that borrowing now accounts for the bulk of deficit financing under the 2026 budget, reflecting a deeper structural imbalance between revenue and expenditure despite recent gains in government income.

The borrowing appetite has continued into 2026, but it did not start this year. Since 2025, Tinubu has repeatedly returned to the National Assembly for fresh approvals, showing a sustained reliance on debt financing. In July 2025, the Senate approved the administration’s $21bn external borrowing plan for 2025–2026, covering infrastructure, security, and other priority sectors. That approval was quickly followed by fresh requests. In October 2025, Tinubu wrote to the Senate seeking approval for a $2.3bn external loan to help finance the 2025 budget deficit. This was about one month after the president claimed that the country had met its revenue target and did not need to borrow to fund the 2025 budget.

Barely weeks later, in November 2025, the President returned with another request, this time seeking approval for a N1.15tn domestic loan, coming just days after lawmakers had already approved the earlier $2.3bn borrowing.

The pattern persisted into 2026. In March 2026, Tinubu again approached the Senate for approval to secure $6bn in fresh external loans, which lawmakers approved within hours of submission.

Only weeks later, in April 2026, the President sought parliamentary approval for another $516m foreign loan to finance sections of the Sokoto–Badagry superhighway. The facility, according to his letter to lawmakers, is to be arranged by Deutsche Bank with a nine-year tenor, including a grace period of up to three years.

The April request itself followed an earlier $747m syndicated loan secured for a coastal highway project, reinforcing a steady pipeline of infrastructure-backed borrowing.

The fiscal picture, therefore, is not that Nigeria remains cash-strapped as it was before the revenue reforms. Rather, the challenge is that higher earnings have not translated into reduced borrowing. While rising revenue has created some fiscal breathing space, it has not imposed sufficient discipline, with the National Assembly continuing to approve new loans even as the country’s debt burden climbs.

Capital projects suffer from underfunding

The clearest cost of Nigeria’s borrowing cycle is not only the debt stock. It is the squeeze on capital projects. The World Bank said Federal Government capital spending fell from 1.3 per cent of GDP, or N5.5tn, in 2024 to 1.0 per cent of GDP, or N4.5tn, in 2025. It described capital spending as the main adjustment margin, with higher personnel costs, debt service, and intervention spending absorbing available resources.

It also noted that capital budget execution was weak, with only 24 per cent of the prorated 2025 capital budget for ministries, departments and agencies implemented. That means many approved projects were on paper but lacked sufficient releases to make strong progress.

The Budget Office later said the Federal Government generated N20.7tn in revenue as of October 2025, representing 61 per cent of the target, but applied N13.69tn to debt service. It spent N8.10tn on capital projects between January and September 2025.

The Ministry of Budget and Economic Planning also disclosed that only 30 per cent of the 2025 capital budget would be released in 2025, with the remaining 70 per cent rolling over into 2026. The circular admitted that the government was “constrained by revenue challenges.” While the government announces large capital budgets, actual cash releases lag behind because debt service, personnel costs and statutory deductions take priority.

Rising debt sparks concerns over fiscal discipline

The Chief Executive Officer of CSA Advisory and a development economist, Aliyu Ilias, said the sharp increase in borrowing raises serious macroeconomic concerns, warning that the scale of new debt could worsen inflation and cost-of-living pressures.

Speaking with The PUNCH in a telephone interview, Ilias said that while borrowing could support growth if properly deployed, the risks currently outweigh the benefits, especially given Nigeria’s rising debt service burden.

“The fact is that it has negative and positive impacts. But the negative impact is that we already have issues of debt service. You look at our budget, about N15tn is needed to service debt, and now we’re incurring more,” he said.

According to him, increased borrowing could inject excess liquidity into the economy, fuelling inflationary pressures if not well managed.

“When you have more money in circulation, it depends on how we manage it. It can bring inflation, and when you have inflation, it will actually increase the cost of living,” he added.

He stressed that the key issue is not borrowing itself but how effectively the funds are utilised.

On alternatives to borrowing, the economist urged the government to focus on boosting oil output and strengthening trade performance.

However, he described the current borrowing trend as excessive, especially in light of earlier reforms aimed at increasing government revenue.

“If you ask me, I think it’s excessive. We removed fuel subsidy and FX subsidy to have more money, yet we are still borrowing more,” he said.

He also criticised weak budget implementation, particularly in capital expenditure, noting persistent rollovers and delays.

“Budget implementation over the past few years has been very poor. Capital expenditure has not been well executed, and projects are rolled over from one year to another,” he said.

Ilias added that beyond borrowing, there is a need to strengthen fiscal discipline and improve the efficiency of public spending.

During a recent media chat, the Chief Economist and Director of Research at the Nigerian Economic Summit Group, Dr Olusegun Omisakin, said the issue is not borrowing itself but how the funds are utilised.

“Without justifying borrowing, if you look at contemporary economies, you hardly see a significant difference in terms of borrowing levels. Nigeria is still relatively okay when you look at debt-to-GDP and debt-to-revenue indicators,” he said.

He, however, stressed that the real concern is the use of borrowed funds, noting, “The challenge is what we use the money for. If Nigeria borrows and you see the impact on infrastructure, nobody will really be concerned about the rate of borrowing.”

Omisakin added, “The concern is, what do we do with the borrowing, why do we borrow, and where is the borrowing going? That is what we should be focusing on, rather than just saying let’s stop borrowing. No nation stops borrowing.”

This argument was also supported by the Labour Party presidential candidate in the 2023 election, Peter Obi, who recently stressed that Nigeria’s growing debt is not the problem, but how the country uses borrowed funds is.

“Borrowing is not inherently wrong. “Nations borrow to improve productivity and stimulate growth. Debt becomes a problem only when it finances consumption, inefficiency, or corruption rather than investment, as is the case in Nigeria,” he said in a post on his X handle.

“A new Nigeria, where loans, if taken, translate into productivity instead of consumption, is very much possible,” he added.

However, a renowned economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said while borrowing may not be entirely avoidable, Nigeria must urgently rein in its rising debt profile and reduce reliance on loans through stronger revenue and fiscal discipline.

In a telephone conversation with The PUNCH, Yusuf said, “We need to work on the growth of our debt. We need to devise strategies to ensure that our debt levels are sustainable.”

He noted that recent tax reforms could play a critical role in easing borrowing pressures if properly implemented.

“With this tax reform, I expect that our revenue should improve. And if the revenue improves, we need to borrow less in order to help us with respect to managing our debt levels better,” he said.

The economist added that favourable oil price trends could also provide temporary fiscal relief, reducing the need for additional borrowing if managed prudently.

“As long as this trend lasts, whatever extra revenue we are able to make, we can use it to reduce our borrowing,” he said.

Beyond revenue, Yusuf pointed to what he described as structural inefficiencies in government spending, arguing that the Federal Government’s expanding expenditure responsibilities were a major driver of borrowing.

“The Federal Government is overloaded with expenditures which should not be its responsibility,” he said, noting that several functions currently handled at the centre ought to be devolved to states in a true federal system.

He stressed that the government should refocus spending on core sovereign responsibilities such as security and strategic national infrastructure.

“The Federal Government should concentrate more on what I call sovereign responsibility. That is the way many federations operate,” he said.

Yusuf warned that Nigeria no longer has the option of relying on monetary financing to cushion fiscal pressures, making reforms more urgent.

The Emir of Kano, Muhammadu Sanusi II, and the Presidency recently traded words over Nigeria’s rising debt burden, following renewed concerns by the monarch about continued borrowing by President Bola Tinubu’s administration.

Sanusi, a former Governor of the Central Bank of Nigeria, questioned the Federal Government’s growing reliance on loans despite the removal of petrol subsidy, warning that weak fiscal discipline could undermine the gains expected from the reforms.

“We’ve removed the subsidy. We’re now spending it. What we should not see is fiscal indiscipline. You cannot remove wastages and continue borrowing. If you’re not paying the subsidy and you’ve got the money, why are we still borrowing?” he asked during an interview on News Central TV.

Responding, the Presidency, through the Special Adviser on Policy Communication, Daniel Bwala, defended the borrowing plan, saying it was targeted at critical infrastructure development.