In a recently released debt profile and the debt projections in the Medium Term Expenditure Framework and Fiscal Strategy, MTEF/FSP, Paper 2024-2026, Nigeria is projected to be in N29.92tn debt in three years time.
This analysis is based on FG’s plan to borrow more money to fund the already existing debts. Plans are already ongoing for FG to take N26.42tn loans between 2024 and 2026.
A breakdown for 2024 shows that the Federal Government plans to get N6.04tn from domestic lenders and N1.77tn from foreign creditors and by 2025, the Federal Government plans to borrow N8.54tn, which is also less than the N10.62tn targeted for the same year in the previous MTEF/FSP.
The Federal Government plans to borrow N10.07tn by 2026, which consists of N8.94tn domestic loans and N1.13tn external debt.
The above analysis tells that the Federal government plans to focus more on domestic borrowing and reduce in foreign borrowing.
Based on the above analysis, the Federal Government is reducing its appetite for foreign loans to focus more on borrowing from domestic lenders.
President Bola Tinubu has said his administration is committed to breaking the cycle of borrowing for public service. The president admitted that the country could not continue to service its debt with 90 per cent of its revenue.
“Can we continue to service external debts with 90 per cent of our revenue? It is a path to destruction. It is not sustainable. We must make the very difficult changes necessary for our country to get (wake) up from slumber and be respected among the world’s great nations.
“To build a great nation, we must make bold decisions; even though it may be painful, it is not about you and me. It is about generations yet unborn,” Tinubu said.
However, the borrowing plan is still ongoing and while the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, spoke at the unveiling of the eight-point agenda for the economy, he noted that
“The government is not in a position to borrow if you consider 90 per cent debt service to revenue, and behind that, a rising debt to GDP ratio. If you look at the last budget, you will see a borrowing requirement built into it and appropriated by the National Assembly. And that is ongoing.”
Over the years, Nigeria’s low revenue generation has pushed the government to borrow more. The rising debt has led to an increasing cost of debt servicing for the Federal Government.
Read also: DMO: Nigeria’s Public Debt Hits N87.38 Trillion, June 2023 Q1
The World Bank recently projected that debt servicing would gulp 123.4 per cent of the Federal Government’s revenue in 2023 and between January and July alone this year, the Federal Government has already spent 75.92% of its aggregate revenue on debt servicing.