The fresh $1bn loan request

IN yet another scary development that signposts the Federal Government’s unwillingness to backtrack from its accustomed borrowing spree, the World Bank has fixed December 16 as a tentative approval date for a fresh $1bn Development Policy Financing loan. The initiative is tagged “Nigeria Actions for Investment and Jobs Acceleration (P512892).” This was indicated in a project document published by the bank on October 27. The new facility is said to comprise a $500m International Development Association credit and a $500m International Bank for Reconstruction and Development loan, and is part of the bank’s broader support package ostensibly aimed at consolidating Nigeria’s post-reform stability and driving inclusive growth across key sectors of the economy.  Says the document: “The proposed Development Policy Financing supports Nigeria’s pivot from stabilization to inclusive growth and job creation. Structured as a two-tranche standalone operation of US$1.0 billion (US$500m IDA credit and US$500m IBRD loan), it seeks to catalyse private sector–led investment by expanding access to credit, deepening capital markets and digital services, easing inflationary pressures, and promoting export diversification.”

Almost immediately it assumed power, the Bola Tinubu administration rolled out certain economic policies that have made everyday life a much more intense struggle for most Nigerians. It removed subsidy on petroleum, floated the naira, and ended deficit financing by the Central Bank. As it has pointed out time and again, the measures are meant to stabilise the economy, narrow the fiscal deficit, and restore investor confidence. However, the grim statistics from manufacturing losses, unemployment and poverty tend to paint a less rosy picture.  In any case, as of March 31 this year, Nigeria’s total public debt was ₦149.39 trillion (approximately $97 billion). Domestic Debt was put at ₦78.76 trillion ($51.26 billion) while external debt as of the first quarter of 2025 stood ₦70.63 trillion as of Q1 2025. The debt-to-GDP ratio, as of 2024, was 46.77 percent, with every citizen basically owing ₦630,064. Interest payment per year is put at ₦3,896,435,934,066 (approximately $123,471 per second). As of April this year, household debt was $38.7 billion. or 20.4 percent of Nigeria’s GDP, while the indebtedness of states stood at N11.47 trillion on June 30, 2024. Debt Service-to-revenue ratio was estimated at 83 percent in 2024. As a matter of fact, the Federal Government has reportedly borrowed N17.36 trillion from domestic and foreign sources in the first 10 months of this year, which actually represents N6.06 trillion (55.6 percent) in excess of the N10.9 trillion stipulated in the 2025 Appropriation Act on 10 months prorate bases. The total borrowing in the 2025 approved budget is N13.08 trillion for the entire fiscal year. Yet it initiated moves to borrow $2.35 billion (N3.384 trillion) via the Eurobond issuance, which would increase the total borrowing to N20.74 trillion.

As we noted in previous editorials, the Federal Government has been extremely reckless in its borrowing undertakings. It has tended to mortgage Nigeria’s future while executing nebulous projects. For instance, we had occasion to critique the oil-for-cash deals undertaken by the Muhammadu Buhari administration. As we noted, while the deals provided quick cash, they undermined Nigeria’s ability to supply its own refineries and were sure to lead to a dependence on refined oil imports, despite Nigeria’s potential for self-sufficiency. They hampered domestic refining and depleted future revenue for immediate funding. As the Nigerian National Petroleum Company Limited (NNPCL) bid to raise at least $2 billion in new loans against 30,000- 35,000 bpd of crude production, we noted that it is generally a bad idea to use one’s existing assets to borrow against projected future earnings since, at the end of the day, the future, just like the past, is a foreign country, and there is no telling what it will bring. As we argued, if it is generally inadvisable to use current earnings as a hedge against the future, since that is tantamount to pawning one’s future security, it is objectively dangerous in the case of a commodity as uncertain and precarious as crude oil. As a matter of fact, the Buhari administration, aided by a subservient Senate, took borrowing as an article of faith, effectively plunging Nigeria into debt peonage. It is distressing that the Tinubu government is following the same destructive path.

It is a no-brainer that excessive loan taking by a government can lead to a debt crisis, limiting its ability to invest in crucial sectors like healthcare, education, and infrastructure. High interest rates can also divert funds meant for public services to debt repayment. Furthermore, it can weaken the currency, increase inflation, and make the economy vulnerable to external shocks. The government’s new loan bid might be aimed at unlocking private sector growth and lowering the cost of doing business, while expanding opportunities across agriculture, trade, and digital services, but it is still true that he who goes a-borrowing goes a-sorrowing. It does not have to take endless borrowing to lower costs for firms and households, reduce inflationary pressures, and enhance export competitiveness. Just how do you continue taking so many loans even after the removal of subsidy on petrol? Was part of the arguments for subsidy removal not that it would plug leakages, curb corruption and free up funds for developmental projects? What has been done with the huge allocations to the levels of government?

To be sure, borrowing is an integral part of governmental operations. Governments all over the world borrow, but they do so against defined benchmarks, and Nigeria cannot compare its metrics to those of the advanced economies, which have a large production base. Nigeria’s manufacturing sector is in severe crisis. Going forward, the government needs to cut its coat according to its cloth. It needs to halt its borrowing spree. It should reduce governance costs, cut down on importation, battle illegal mining of Nigeria’s mineral resources to a standstill, and cut down on the luxury that surrounds public office. More than 130 million Nigerians live in poverty, and it is not borrowing that will lift them out of that trap. As the World Bank itself has noted, while macroeconomic stability has returned, “Nigeria’s economy has yet to shift decisively into a higher and inclusive growth path.” That verdict is hard to contest.