Babatunji Wusu –
- The Federal Government is set to exceed its 2024 domestic borrowing target by N4 trillion, a 67% increase.
- By November 2024, domestic borrowing had already surpassed N8.93 trillion, 49% above the target.
- The government’s borrowing for 2025 is projected to rise to N9.22 trillion, 18% higher than in 2024.
- Analysts warn that rising debt levels and high interest rates are squeezing the private sector and contributing to inflationary pressures.
- There are concerns over the long-term sustainability of Nigeria’s debt and its impact on economic growth.
As President Bola Tinubu prepares to present the 2025 national budget to the National Assembly, concerns about Nigeria’s rising domestic debt are intensifying. The Federal Government (FG) is set to exceed its domestic borrowing target for 2024 by N4 trillion, a 67% overrun. This comes amidst mounting worries about the country’s increasing debt burden, which reached N42.33 billion in the first half of 2024.
By November 2024, the government had borrowed N8.93 trillion from domestic investors, surpassing the N6 trillion target for the year. With additional borrowing expected, the total domestic borrowing for 2024 could reach N10 trillion, marking a 67% increase from the budgeted amount. This surge in borrowing is largely due to the government’s plans to finance a substantial portion of the 2025 fiscal deficit—projected at N9.22 trillion—through domestic and external loans.
The borrowing activities are primarily centered on Nigeria Treasury Bills (NTBs), FGN Bonds, and Savings Bonds. In the third quarter of 2024 alone, the government borrowed N2.134 trillion. Analysts suggest that the sharp increase in domestic borrowing is partly driven by the Central Bank of Nigeria’s (CBN) aggressive interest rate hikes, which have made government securities more attractive to investors.
While some analysts argue that borrowing is necessary for economic growth, especially when directed toward infrastructure projects, there are concerns about the sustainability of Nigeria’s growing debt stock. High domestic borrowing has led to inflationary pressures, increased lending costs for the private sector, and a crowding-out effect, where businesses struggle to access affordable credit.
Economic experts like David Adonri of Highcap Securities and Dr. Muda Yusuf of the Centre for the Promotion of Private Enterprise caution that the government’s increasing debt load, if unchecked, could lead to a sovereign default, placing further strain on the country’s fiscal and monetary policies. The situation is compounded by high interest rates, which make borrowing more expensive for both the government and businesses.
Despite these concerns, some analysts believe that borrowing can be justified if funds are invested in productive sectors that stimulate economic growth, particularly infrastructure. However, others stress the need for the government to carefully manage debt sustainability, ensuring that debt levels do not exceed the country’s capacity to service them without stifling private sector growth or economic development.
The challenge for the Nigerian government is to balance necessary borrowing for development with the long-term goal of fiscal stability, ensuring that debt remains sustainable and does not derail economic progress.
