By Chinwendu Obienyi
Red flags over President Bola Tinubu’s request to the National Assembly for approval to secure $21.5 billion and ¥15 billion in external loans have repeatedly been raised, with FBNQuest Merchant Bank, warning that the proposed borrowing plan could push Nigeria’s public debt beyond sustainable levels and further expose the economy to exchange rate risks.
If fully raised, the $21.5 billion would represent a 44 per cent jump in Nigeria’s external debt stock, which stood at $45.8 billion as of December 2024, according to data from the Debt Management Office (DMO). The country’s total public debt, currently at around 54 per cent of GDP, could rise to over 66 per cent of 2024 GDP, significantly breaching traditional debt sustainability thresholds for developing economies.
FBNQuest Merchant Bank in an emailed note seen by Daily Sun, warned that the plan could compound Nigeria’s macroeconomic fragility, particularly in the context of a floating exchange rate regime, where foreign debt servicing costs are directly influenced by currency depreciation.
“Total external debt has grown markedly since Q2 2023, when the naira was floated, rising from 37.8 per cent to 48.6 per cent of total public debt as at Q4 2024, partly due to FX translation effects.
The President’s request sharply diverges from the FG’s earlier external borrowing plan of $7.2 billion under the 2025–2027 MTEF, calling into question fiscal coherence and planning assumptions. Hence, with debt service already consuming about 90 per cent of revenue, higher foreign debt could worsen the fiscal situation in the absence of strong revenue mobilisation efforts”, the note read.
Last week, the Presidency maintained the loans were intended to fund critical infrastructure and spur job creation.
Speaking in a national address on the state of the economy, Tinubu, whilst citing major fiscal and structural reforms undertaken by his administration, revealed that the country’s debt service-to-revenue ratio which stood at nearly 100 per cent in 2022 now stands at 40 per cent.
Describing the development as a turning point in Nigeria’s public finance management, he noted that the government had also repaid all its IMF obligations and grown external reserves from $4 billion in 2023 to over $23 billion by year-end 2024.
“We have stabilised our economy and are now better positioned for growth and prepared to withstand global shocks,” the President stated.
According to him, the country’s fiscal health is on the mend, with the country recording over N6 trillion in revenue in the first quarter of 2025 alone, a sharp improvement driven by enhanced revenue collection and stronger fiscal discipline.
“We have stabilized our economy and are now better positioned for growth and prepared to withstand global shocks. Nigeria’s fiscal deficit narrowed sharply from 5.4 per cent of GDP in 2023 to 3.0 per cent in 2024, a result of improved revenue collection and enhanced financial transparency.
Our first quarter revenue for 2025 alone stood at over N6 trillion,” he announced. “We have also discontinued Ways and Means financing, which has been a key driver of high and sticky inflation”, Tinubu said, assuring Nigerians that the sacrifices made so far are beginning to yield results.
“These new fiscal reforms are not just about revenue; they are about building a system where prosperity is shared, and no one is left behind. “Our journey is not over, but our direction is clear. By the Grace of God, the worst is behind us. The future is bright, and together, we will build a stronger, more inclusive Nigeria”, the President said.
However, the bank in its emailed note stressed that previous large-scale borrowings have delivered limited development outcomes, citing project delays, poor execution, and lack of transparency.
“We continue to emphasise that FX-denominated borrowings increase exchange rate risk and may restrict the fiscal space, particularly if currency pressure escalates or revenue fails to meet expectations.
Beyond macro risks, governance concerns linger, given the limited developmental outcomes achieved from similar borrowings in the past and weak project execution capacity”, the bank said.
Broadly speaking, while the plan’s objectives are commendable, execution, transparency, and debt sustainability must remain central considerations as Nigeria navigates a constrained fiscal environment and tight external financing conditions.