It has just been reported that the Senate has approved the Executive’s request to borrow some funds both externally and from the domestic capital market. The amount of the loan approved is a staggering 21.5 billion dollars in addition to other related borrowings. To put the extent of the humongous amount in context, it is in order to recall that Dangote Refinery was built with a colossal amount of about 20 billion dollars and that this amount is multiple times the size of the 2025 National Budget of about 50 trillion Naira. The Senate also approved the issuance of local bonds in the amount of 757.9 billion to clear the backlog of pension arrears. There was also the additional approval to issue 2 billion dollars in foreign currency-denominated loans to be raised at the Nigerian Stock Exchange.
The request for this loan, it is reported, was submitted by the president to the National Assembly on May 27, 2025. This is a record speed of approval of under two months. It most certainly appears that the race is on for the 2027 election, whose temperature has now been heightened due to developments in the political arena, particularly regarding the ongoing attempt at the formation of a coalition. There is some concern expressed about the mounting debt stock. It is reported that the debt position standards are at 121 trillion Naira with an external component of the equivalent of 43 billion dollars.
The debt-to-GDP ratio has been reported to stand at 39.4%, which compares with the threshold rate of 40% adopted by the government and the 55% rate recommended by the World Bank and IMF. But the actual problem is with sustainability since we now spend over 80 percent of federal government revenue on debt servicing. We are therefore speedily digging the hole further for us to suffer debt overhang of a scale greater than the one Okonjo-Iwela got us out of as finance minister during the Obasanjo administration. And that situation has untoward implications for fiscal management. In fact, some prominent opposition party figures alluded to the fact that this administration in its two years has borrowed, if added up, more than the other administrations since the return to parliamentary democracy!
There are issues of clarity surrounding these loan requests. Some claim that disbursement would be ongoing over the medium term. That sounds plausible since Nigeria is not in control in this respect. We have to package the loan request and apply, and our lenders would have to observe their respective protocols before approval is granted and disbursement is made. Such disbursements, in most cases, are graduated to be disbursed conditionally.
It is also asserted that the requests are all contained in the Medium-term Expenditure Framework and the Physical Strategy Paper as well as the 2025 budget estimates. Therefore, the approval was just a routine exercise. But it is difficult to give the benefit of the doubt, as there is a gross lack of transparency in the entire exercise.
The projected domestic borrowing of a whopping amount of almost eight hundred billion Naira has adverse implications for the private sector, which ideally should be the engine of growth of the economy. This extent of borrowing will crowd out the private sector and stoke up interest rates in an inflationary environment where interest is at a suffocating rate of 22.2 percent, down due to a rebasing of the economy from an unsustainable high rate of over 34 percent.
The unprecedented approval to borrow foreign currency debt of 2 billion dollars from the domestic capital market raises questions regarding the legal tender status of the Naira. As approval was given, it was argued that it would deepen the stock market and attract diaspora inflows as well as other investments from sundry foreign exchange sources. That it would ease pressure on the foreign reserves and assist with the efforts to stabilise the rate of exchange.
There is the need to say a word about the pension scheme in the country. We have been unfair to pensioners in the country. It is unconscionable to treat those who gave the best time of their lives to Nigeria only to be faced with non-payment of pensions when due. Most of those concerned have no alternative sources of income. They end up languishing in penury, faced with the stark possibility of early death. This should not be so, as the contributory pension scheme, which was supposed to take care of such concerns, was operated as proposed.
But what has led to all this problem is our penchant to undermine the performance of policy by our refusal to show fidelity to the terms and conditions guiding their operation and to use the funds derived from investments, whose scope is clearly enshrined in the enabling act as directed. But the abuse arose when the authorities, who in the event of needs resort to borrowing from such funds, thereby undermining their sustainability. There is therefore the need for government to show more discipline by only borrowing from legitimate sources. We must go the extra mile to ensure that we do not subject our pensioners to such harrowing experiences.
The persistent concern over the recent loan approvals is that due diligence might not have been exercised in granting the approval by the Senate. It is claimed that the loans are all for capital projects and human capacity development in alignment with the conditions as contained in the Fiscal Responsibility Act, but the details in the public space are scant. There is also the fear about the likely misapplication of the loans. We must always bear in mind the perennial concerns about intergenerational equity.
Most of these loans might not be due for repayment until long after this administration has exited. Therefore, the burden will be passed on for future generations to bear. We therefore appeal to the consciences of the dramatis personae that best efforts must be made to ensure that the nation obtains due value as should be derived from these loan proceeds.
Boniface Chizea, Lagos.
