By Ade Adesokan
The Senate’s Tuesday approval of President Bola Tinubu’s massive $21.5 billion external borrowing plan represents a defining moment in Nigeria’s fiscal trajectory. While lawmakers presented this as a procedural endorsement aligned with the Medium Term Expenditure Framework, the reality demands deeper scrutiny. This borrowing spree, coupled with additional requests for €65 million in grants, ¥15 billion in Japanese loans, and ₦757 billion in domestic bonds, signals either bold economic pragmatism or dangerous fiscal overreach.
The arithmetic tells a sobering story. Nigeria’s external debt has already reached $41.6 billion, and with the new borrowing plan potentially adding $24 billion more, the nation’s total public debt stock, currently exceeding ₦145 trillion, faces another substantial surge. While proponents argue that Nigeria’s debt-to-GDP ratio of approximately 50% remains below the international threshold of 56%, this metric provides false comfort when examined against Nigeria’s fragile revenue base and structural economic vulnerabilities.
The debt service-to-revenue ratio, though reportedly reduced from over 90% to under 70% following recent tax reforms and subsidy removal, remains dangerously elevated by any global standard. For a country where government revenue collection has historically been weak and oil price volatility continues to dictate fiscal fortunes, maintaining such debt service burdens borders on recklessness. The claim that most loans are concessional with favourable terms spanning up to 35 years may offer temporary relief, but it merely pushes the burden to future generations while potentially constraining policy flexibility for decades.
Senator Solomon Adeola’s assertion that this approval was “largely procedural” reveals troubling casualness toward fiscal responsibility. The fact that these borrowings are already embedded in the 2025 Appropriation Act suggests that parliamentary oversight has been reduced to rubber-stamping predetermined executive decisions. This procedural convenience undermines the democratic principle of legislative scrutiny over public finances and raises questions about genuine assessment of borrowing necessity and alternative financing mechanisms.
The borrowing plan aims to bridge budget deficits and fund key infrastructure and development projects through multilateral and bilateral lenders, including the World Bank and African Development Bank. While infrastructure development remains crucial for Nigeria’s long-term growth prospects, the recurring pattern of massive borrowing for similar purposes without corresponding improvements in economic fundamentals suggests systemic planning failures. Previous borrowing cycles have not translated into sustainable economic transformation, raising legitimate concerns about whether this latest tranche will achieve different outcomes.
The government’s confidence in anticipated revenue gains from the Nigerian Tax Act 2025, projected to grow by over 18 per cent year-on-year starting from 2026, appears optimistic given Nigeria’s historical challenges with tax collection and economic diversification. Banking fiscal sustainability on projected revenues from untested reforms while simultaneously accumulating massive debt obligations creates a precarious balancing act. Should these revenue projections fail to materialise, Nigeria could find itself in a debt trap similar to those experienced by other heavily indebted developing nations.
The timing of this borrowing binge is particularly concerning given global economic uncertainties and tightening international credit conditions. While Nigeria has maintained its record of not defaulting on existing loans and recently repaid its IMF COVID facility, the country still faces annual charges of approximately $30 million for SDR-linked obligations. Adding $21.5 billion in new commitments, regardless of favourable terms, significantly increases exposure to external shocks and currency volatility risks.
More fundamentally, this borrowing strategy reflects a concerning preference for debt-financed development over structural reforms that could enhance domestic revenue generation and economic productivity. Nigeria’s continued reliance on external borrowing to fund basic government operations and development projects highlights persistent weaknesses in tax administration, public sector efficiency, and economic diversification efforts. Rather than addressing these root causes, the current approach risks perpetuating dependency on foreign creditors while accumulating unsustainable debt burdens.
The Senate Committee on Local and Foreign Debt’s recommendation that the borrowing aligns with approved fiscal frameworks does not address whether these frameworks themselves are realistic or sustainable. The Medium Term Expenditure Framework and Fiscal Strategy Paper, while providing planning coherence, may be based on overly optimistic assumptions about Nigeria’s economic growth prospects and revenue generation capacity.
Critical questions remain unanswered about debt sustainability analysis, contingency planning for revenue shortfalls, and alternative financing mechanisms. The government’s commitment to fiscal discipline and transparency, while rhetorically reassuring, requires concrete demonstration through improved debt management practices, enhanced parliamentary oversight, and regular public disclosure of debt utilisation and performance metrics.
Nigeria’s borrowing trajectory becomes even more concerning when viewed against the backdrop of recent debt crises across developing nations. Countries including Sri Lanka, Zambia, Ghana, and Pakistan have either defaulted on their obligations or are struggling to avoid similar predicaments, offering stark warnings about the perils of unsustainable debt accumulation. A recent United Nations Development Programme report revealed that 54 developing economies are currently grappling with severe debt problems, with more than half of low-income countries at high risk of debt distress or already experiencing it.
The specific details of President Tinubu’s six-year borrowing plan reveal the scale and scope of Nigeria’s debt-financed development strategy. The rail and road infrastructure component alone accounts for over $7.8 billion, with the Eastern Rail Line reconstruction from Port Harcourt to Maiduguri receiving the largest allocation of $3 billion. The Akwanga–Jos–Bauchi–Gombe Dual Carriageway project commands $1.33 billion over four years, while the Lagos Green Line Rail Project secures $2 billion for urban mass transit development. Additional significant allocations include $700 million for the Lagos–Calabar Coastal Highway and $596.2 million for Kaduna–Kano rail modernisation.
Power and energy infrastructure represents another substantial borrowing category, with the Eastern and Western Super Grids receiving $1.14 billion and $1.07 billion respectively for transmission upgrades. The Presidential Power Initiative secures $100 million for electricity distribution improvements, while the Zungeru Hydropower Transmission Lines project receives $116 million to evacuate 700MW of power capacity.
Port modernisation and security infrastructure command significant resources, with Eastern Port upgrades in Aba, Onne, and Calabar allocated $508 million, and the Nigeria Border Security Project’s second phase receiving $540 million. Social and climate investments, while smaller in scale, include $100 million for Youth Entrepreneurship Investment through the African Development Bank, $45 million for Sokoto Health Infrastructure, $50 million for Yobe Integrated Climate Action, and ¥150 billion for the Emergency Food Security Programme through JICA.
This comprehensive borrowing plan, while addressing legitimate infrastructure and development needs, promises significant regional and economic transformation if successfully executed. The South-East and North-East regions stand to benefit from historic infrastructure investments, with the $3 billion rail line and port upgrades potentially stimulating industrial resurgence in previously underserved areas. Northern Nigeria’s inclusion in key road and energy grid expansions could reduce regional isolation and empower local agricultural markets, while South-West investments, particularly Lagos-focused transit and road upgrades, support Nigeria’s commercial capital and address massive urban congestion challenges.
The economic implications extend beyond mere infrastructure provision. Transport and energy investments form the backbone for industrial growth and logistics efficiency, potentially boosting GDP contributions from diverse regions. The youth entrepreneurship component directly tackles unemployment while fostering innovation and opening pathways for sustainable small and medium enterprises. Power grid modernisation addresses the chronic energy downtime that hampers productivity and increases operating costs across all economic sectors.
From a citizen perspective, the borrowing plan targets immediate needs through health and climate projects that bring tangible relief to vulnerable communities, supporting long-term well-being objectives. Security and border infrastructure improvements promise safer movement of goods and people, while the emergency food security programme addresses inflation-driven food insecurity particularly affecting low-income households.
However, these potential benefits must be weighed against fundamental questions about fiscal sustainability, especially when compared to recent debt crises across developing nations. Sri Lanka’s crisis stemmed from excessive money printing and disruptive agricultural policies, Ghana’s from impractical election promises, and Zambia’s from specific employment and climate vulnerabilities. Nigeria’s current approach risks creating similar vulnerabilities through over-reliance on debt financing without corresponding revenue generation capacity.
Nigeria stands at a fiscal crossroads where the choices made today will determine the economic inheritance of future generations. While strategic borrowing for productive investments can catalyse development, the current trajectory suggests an unsustainable reliance on debt financing without corresponding improvements in economic fundamentals. The Senate’s approval may have been procedurally correct, but it represents a missed opportunity for rigorous fiscal accountability and alternative policy exploration.
The path toward genuine debt sustainability requires more than favourable loan terms and optimistic revenue projections. It demands structural economic reforms, improved governance, enhanced domestic resource mobilisation, and a fundamental shift from debt-dependent development to productivity-driven growth. The cautionary tales from Sri Lanka, Ghana, Zambia, and other debt-distressed nations demonstrate that even well-intentioned development borrowing can lead to fiscal catastrophe when not backed by robust economic fundamentals and prudent debt management practices. Until these foundational changes occur, Nigeria’s mounting debt burden will remain a sword of Damocles hanging over the nation’s economic future, regardless of how many procedural approvals it receives from compliant legislators.
Ade Adesokan is a public affairs commentator and human rights activist
