President Bola Tinubu has sought approval from the National Assembly for significant borrowing, primarily to fund the 2025-2026 budget cycle and vital infrastructure projects.
The key requests that have been publicly reported include:
- External Loan Request (2025-2026): The Nigerian Senate approved a request for an external borrowing plan of over $21 billion (specifically reported as $21.19 billion foreign loan, €4 billion, ¥15 billion, plus a $65 million grant, with reports often rounding it to $21 or $21.5 billion). This is intended to fund development projects in areas like infrastructure, power, transport, health, and education.
- Domestic Bond: The Senate also approved the raising of a domestic bond of approximately ?757 billion to clear outstanding pension liabilities under the Contributory Pension Scheme.
- Targeted Infrastructure Loan: The President also sought approval for a smaller, additional $347 million external loan, primarily to support the funding of the Lagos-Calabar Coastal Highway project.
The Cost and Scale of Nigeria’s National Debt
The country’s reliance on new borrowing is set against an already massive and rapidly growing national debt, which is creating a significant fiscal burden.
Total Debt Profile
- As of March 31, 2025, Nigeria’s total public debt was approximately ?149.39 trillion (equivalent to about $97.24 billion).
- Forecasters suggest that the nation’s overall debt could reach around ?187.79 trillion by the end of 2025.
- This colossal debt means that as of March 31, 2025, the debt per Nigerian citizen was approximately ?652,000.
The Crippling Cost of Debt Servicing
The primary cost of Nigeria’s accumulated debt is the overwhelming expense of interest payments, which severely limits the government’s ability to fund essential services:
- Debt Service-to-Revenue Ratio: The most alarming metric is the ratio of debt servicing to the Federal Government’s revenue. Reports indicate that over 80% (and in some prior periods, as high as 96% or 83%) of the government’s total revenue is allocated to simply servicing (paying interest on) debts.
- Crowding Out Critical Spending: This means minimal funds are left for essential capital and human development sectors. For instance, in a recent budget, while debt servicing took up 29% of the budget share, education, health, and infrastructure received significantly less.
- Naira Devaluation Impact: The cost of servicing external debt has been severely aggravated by the significant devaluation of the Naira. As the Naira weakens against the US dollar and other currencies, the government requires much more Naira to pay back the dollar-denominated loans.
The Burden on Future Generations and New Tax Laws
The combination of massive borrowing and high servicing costs directly translates into a significant burden on the current and future generations of Nigerians, and it is the main driver behind the push for new tax laws.
Intergenerational Burden
Economists refer to the effect of high debt as the “burden of public debt,” where one generation reduces the economic welfare of the next.
- Future Taxation: The government will eventually need to generate significantly more revenue to repay the principal on these loans. This is a direct promise of higher future taxes or the continuous introduction of new tax laws, as debt service costs are simply too high to be sustainable with current revenue.
- Reduced Capital Stock: High debt service consumes money that would otherwise be invested in crucial infrastructure and human capital (education and health). This means future generations will inherit a country with underdeveloped infrastructure and potentially a less-skilled workforce, lowering their quality of life and economic growth potential.
Link to Tax Laws
Nigeria’s tax revenue has historically been low—around 7.3% of GDP in 2021, which is far below the averages for West Africa and the tipping point needed for significant economic acceleration (estimated to be 12.5% to 13% of GDP).
The aggressive push for new tax laws and reforms (like the “Strategic Revenue Growth Initiative”) is a direct response to the massive debt burden. The goals of these reforms are to:
- Increase the revenue-to-GDP ratio (with a target of 15% by 2025).
- Expand the tax base and counter tax evasion.
In short, the existing debt is consuming almost all government revenue, forcing the administration to aggressively seek new ways—including new tax laws, increased excise duties, and potentially carbon taxes—to raise revenue just to keep up with the soaring interest payments and finance development.
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