Experts Warn as Tinubu Seeks Approval for $2.2bn Fresh Loan to Fund 2024 Budget

President Bola Ahmed Tinubu has sought the National Assembly’s approval for a $2.209 billion (N1.767 trillion) external loan to cover part of Nigeria’s N9.17 trillion fiscal deficit in the 2024 budget. The request, made through a letter addressed to Senate President Godswill Akpabio and House Speaker Tajudeen Abbas, aligns with provisions in the 2024 Appropriation Act. Tinubu emphasized that the loan would be raised through Eurobonds or other external borrowing instruments and would form a crucial part of the country’s fiscal strategy.

The President also submitted the 2025–2027 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), recently approved by the Federal Executive Council, for legislative review. In response, the Senate referred the loan request to its Committee on Local and Foreign Debts, chaired by Senator Aliyu Wamako, with a directive to report back within 24 hours. Similarly, the MTEF/FSP document was sent to the Committees on Finance and National Economic Planning for expedited consideration.

Economic experts have voiced concerns about the implications of the fresh loan. David Adonri, Executive Vice Chairman at Highcap Securities Limited, described Nigeria’s current debt situation as a “debt trap,” warning that the country’s reliance on new loans to service existing debts and finance import-driven budgets could worsen its precarious financial state. He emphasized that while the government cannot survive without additional foreign debt, the long-term consequences could be devastating.

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Professor Uche Uwaleke, President of the Association of Capital Market Academics of Nigeria, highlighted the importance of transparency in loan utilization. He called for clarity on the specific projects the loan would fund, their potential to generate returns, and a clear repayment plan. Uwaleke also raised concerns about the government’s preference for Eurobonds, which are non-concessional and carry high-interest costs, suggesting that more affordable options like Sovereign Sukuk could be explored.

Public Affairs Analyst Clifford Egbomeade acknowledged the potential short-term relief the loan could provide but warned of the rising cost of debt servicing. He noted that Nigeria’s debt servicing expenses reached $3.58 billion in the first nine months of 2024, a nearly 40% increase from the previous year. The devaluation of the naira has further amplified the burden of repaying external debts in local currency.

Egbomeade stressed that the loan’s economic impact would depend on its effective utilization. If channeled into critical sectors like infrastructure, healthcare, or education, it could drive economic growth and improve public services. However, he cautioned that Nigeria’s history of fiscal mismanagement raises doubts about transparency and accountability. Without proper oversight, the loan could lead to wasteful spending and fail to deliver the intended outcomes, leaving the country with an even higher debt burden.

Experts agree that Nigeria must urgently diversify its revenue streams to reduce reliance on borrowing. With many states heavily dependent on federal allocations, the country’s fiscal sustainability remains fragile. Boosting internally generated revenue, restructuring existing loans, and implementing policies for efficient debt utilization are seen as critical steps to mitigate the risks associated with rising debt levels. Without these measures, further borrowing could deepen Nigeria’s economic challenges rather than provide the intended relief.

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