Tinubu seeks fresh $21.7bn foreign loans amid concerns over debt sustainability

President Bola Ahmed Tinubu has asked the National Assembly to approve fresh external borrowing of $20.5 billion and €1.04 billion to finance critical infrastructure and development projects, reopening questions about Nigeria’s growing debt obligations, borrowing strategy and the long-term cost to taxpayers.

The request was conveyed in a letter read by Senate President Godswill Akpabio during plenary on Tuesday.

The proposed borrowing package comprises $20.5 billion and €1.04 billion. Using an illustrative exchange rate of N1,600 to the dollar and N1,850 to the euro, the combined amount would be worth approximately N34.8 trillion. The actual naira equivalent will depend on the exchange rates applicable when the loans are contracted or disbursed.

The request comes as the administration continues to pursue infrastructure development amid fiscal constraints, rising public expenditure and pressure to demonstrate tangible economic improvements before the 2027 general elections.

Although the President said the loans were intended to fund critical projects, the request raises questions about the specific projects to be financed, the terms of the facilities, their repayment schedules and the extent to which the investments are expected to generate economic returns.

Borrowing request raises questions over debt sustainability

Nigeria has relied on domestic and external borrowing to finance budget deficits, infrastructure development and other government obligations. However, the increasing cost of servicing public debt has intensified scrutiny of the country’s fiscal position.

External borrowing can provide governments with resources for roads, railways, electricity, healthcare, education and other capital-intensive projects that might otherwise be delayed by inadequate revenue.

The risks increase, however, when borrowed funds finance projects that do not generate sufficient economic or social returns, or when debt-service obligations grow faster than government revenue.

For Nigeria, the distinction between borrowing for productive investment and borrowing to sustain recurrent expenditure is particularly important because the government faces competing demands for infrastructure, public services, security and social protection.

The latest request therefore places the spotlight on whether the proposed facilities will be tied to clearly identified projects with measurable completion targets, transparent procurement arrangements and independently verifiable benefits.

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Details of the individual projects, lenders, interest rates, maturity periods, grace periods and repayment arrangements were not contained in the information available on the request. These details are necessary to assess the full fiscal implications of the proposed borrowing.

What the loans could mean for taxpayers

The dollar and euro-denominated facilities would expose Nigeria to foreign-exchange risk.

Unlike naira borrowing, external debt must generally be serviced in the currency in which it was contracted. If the naira depreciates significantly against the dollar or euro, the government would need more naira to meet the same foreign-currency repayment obligations.

This creates a potential fiscal vulnerability for a country whose public revenues are largely collected in naira, even though foreign-exchange earnings from crude oil and other sources can help meet external obligations.

The cost of borrowing will also depend on whether the facilities are obtained from multilateral development institutions, export-credit agencies, commercial lenders or other sources. Concessional loans may carry lower interest rates and longer repayment periods than commercial facilities.

Consequently, the headline amount alone does not establish whether the borrowing is affordable or excessive. The financing terms, expected returns and overall debt profile are central to that determination.

Accountability and project delivery under scrutiny

Beyond the question of affordability, the proposed borrowing raises the issue of how the funds will be monitored after approval.

Nigeria has repeatedly faced concerns about abandoned projects, cost overruns, delayed completion and weaknesses in public procurement. New external facilities would require effective safeguards to ensure that borrowed funds translate into completed infrastructure and measurable improvements in citizens’ welfare.

Lawmakers will need to establish the projects covered by the request, the agencies responsible for implementation, the expected completion dates and the mechanisms for monitoring disbursements.

Political timing adds to public scrutiny

The request comes as Nigeria approaches the 2027 general elections, a period when the administration’s economic policies, infrastructure record and management of public finances are likely to face heightened political scrutiny.

The timing does not, by itself, establish that the borrowing is politically motivated. However, it is likely to intensify public demands for evidence that the funds will address long-standing infrastructure gaps and improve living conditions.

Ultimately, the central question is not simply how much Nigeria intends to borrow, but whether the country can convert the additional liabilities into productive assets without placing unsustainable pressure on future budgets.

Until the project details and financing terms are made available, the full implications of Tinubu’s proposed $20.5 billion and €1.04 billion external borrowing remain difficult to assess.