Debate over President Bola Tinubu’s request for $7.7bn of external borrowing has centred on whether the money will build anything
The president’s letter frames it more narrowly. Dated October 26, it asks the Senate to approve ₦10.79tn at the budget rate of ₦1,400 to the dollar, part of ₦29.2tn of new borrowing meant to cover an estimated ₦31.4tn deficit.
The proceeds, it adds, will be received by the Central Bank, lifting reserves and supporting the naira. This is deficit financing with a reserves benefit, not a project loan. The right test is how much of the money is left after existing obligations are met.
The request also arrived in unusual circumstances. A week earlier, the Senate was asked to approve $20.52bn and €1.045bn. Senate President Godswill Akpabio says the new letter cancels that one. A figure that shrinks by well over half in days raises the question of how closely either was tied to a pipeline of projects.
“Heavy domestic borrowing crowds out the firms that would otherwise invest and hire. That is the strongest argument for external money. It holds only if the money is cheaper than the alternatives and is well used.”
The World Bank’s October Nigeria Development Update puts federal interest payments in the first half of 2026 at ₦7.7tn, against revenue of ₦6.2tn, or 124 per cent. Interest rose 37.5 percent from ₦5.6tn a year earlier. Federal capital spending fell to about ₦700bn from ₦2.2tn, or 0.3 per cent of GDP against roughly 1 per cent. Interest costs about eleven times as much as investment.
The Finance Ministry disputes the framing. Six months, it argues, is the wrong window, and the same report projects full-year debt service, interest and principal combined, at 46 percent of revenue. It adds that revenue grew by about 72 per cent, nearly twice as fast as interest.
Those points have force, and the revenue gain is real. But 46 per cent is hardly comfortable, and the bank cautions that part of the improvement in the fiscal position reflects cuts to capital spending rather than a lighter recurrent bill.
The Budget Office’s first-quarter report, which surfaced only this week, points the same way. Debt service took ₦4.63tn, about 91 per cent of revenue in the quarter. Gross oil revenue was ₦2.97tn against a prorated target of ₦9.33tn.
Ministries’ 2026 capital budgets showed zero implementation on 31 March, which the report ties to the extension of 2025 capital releases. Public debt stood at ₦159.35tn ($114.95bn) at the end of March, 45 per cent of it external.
First, borrowed reserves are not earned reserves. Dollar loans add an asset and a liability together and any slide in the naira beyond ₦1,400 raises the cost of repayment.
Second, timing. According to the Debt Management Office, Nigeria has $1.5bn of Eurobonds maturing in November 2027 and $1.25bn in September 2028. A new issue joins that queue.
The president says Eurobonds are quicker to arrange and relatively cheap but concedes that final terms depend on market pricing. He offers no comparison with concessional or multilateral money.
Third, information. The Fiscal Responsibility Act requires quarterly implementation reports within 30 days of each quarter’s end. The first-quarter report arrived months late.
According to CFG Advisory, the reports for the fourth quarter of 2025 and the second and third quarters of 2026 are still outstanding. Senators are being asked to approve billions on a picture that is months out of date.
Refusing the loan would not erase the deficit. It would push more of the burden onto the domestic market, which is already expected to supply ₦18.4tn, or onto spending cuts.
ThisDay reported that private-sector credit fell 14.9 per cent between December and March, while the average maximum lending rate rose to 35.17 per cent.
Heavy domestic borrowing crowds out the firms that would otherwise invest and hire. That is the strongest argument for external money. It holds only if the money is cheaper than the alternatives and is well used.
Senators should require three things. The first is a breakdown of the $7.7bn between deficit financing, reserves and named projects. The second is a published comparison of the all-in cost of Eurobond, concessional and bridge options at current prices, including currency risk.
The third is the overdue implementation reports, with a firm quarterly schedule from here on. None of this is exotic. It is the minimum a lender would ask of a company.
Nigeria can defend borrowing that builds roads, power and schools, or that improves its refinancing profile.
It cannot defend borrowing that mostly moves money into interest while capital budgets go unspent. The Senate’s job is to find out which this is before the loans are signed, not after the bill arrives.
SOURCE: Businessday
