Tinubu seeks $21.7bn in fresh debt with unclear returns

…debt may rise to N200trn, over 91% since 2023

President Bola Tinubu is seeking legislative approval for $21.67 billion in fresh external loans without providing details of the individual projects the funds will finance, raising concerns about the viability and returns of the intended investments.

Economists also insist that the lack of clarity surrounding the projects makes it difficult to determine whether some of the investments should instead attract private capital.

The proposed borrowing comprises $20.52 billion and €1.045 billion under the 2026-2027 external borrowing plan, according to a letter read by Godswill Akpabio, Senate president, during plenary on Tuesday.

Tinubu said the proposed investments would generate employment, promote skills acquisition, encourage entrepreneurship, reduce poverty and improve food security. He argued that external borrowing was necessary to bridge Nigeria’s infrastructure financing gap.

“In light of the need for significant infrastructure investment in the country and the vast financial resources needed to address this gap, it has become essential to pursue broader external borrowings to close the financing shortfall,” he said.

However, the letter did not identify the individual projects to be financed, their expected financial returns or whether alternative private-sector financing arrangements had been considered. The absence of these details makes it difficult to assess the economic justification for adding to the government’s debt burden.

For commercially viable infrastructure, private investment, concessions and public-private partnerships could reduce the government’s upfront financing requirements. But without project-level information, it remains unclear which investments could attract private capital and which require public funding because of their wider social and economic benefits.

The request comes as Nigeria’s public debt stood at N166.79 trillion at the end of June 2026, according to the Debt Management Office. If the proposed loans are fully approved, disbursed and added to existing obligations, public debt could approach N200 trillion, depending on exchange rates and other debt movements.

The latest borrowing request comes despite improvements in government revenue collection following reforms that include the removal of petrol subsidies, foreign exchange liberalisation and changes to the tax system.

Nigeria’s debt profile on the rise

Nigeria’s total revenue collection rose from N6.8 trillion five years ago to N28.7 trillion in 2025, while the revenue agency is targeting N40.7 trillion in 2026.

Federal allocations also increased from N16.28 trillion in 2023 to N28.78 trillion in 2024, according to independent think tank Agora Policy.

Despite the revenue gains, total public debt rose from N87.37 trillion in June 2023 to N166.79 trillion in June 2026, adding to concerns about the government’s ability to finance development without further increasing its debt burden.

“The budget expanded to N68.3 trillion, and the revenue expected to fund most of that would come from borrowings, implying that the debt levels will rise. And that’s what we’re seeing now,” Ibrahim Bakare, a professor of economics at Lagos State University, said.

The latest request follows previous external borrowing approvals, including a $516.3 million Deutsche Bank AG loan for the Sokoto-Badagry Superhighway, approved about five months ago.

The nine-year facility carries an interest rate capped at the Secured Overnight Financing Rate (SOFR) plus 5.3 percentage points annually and includes a grace period of up to three years.

In March, the National Assembly also approved a $6 billion external borrowing plan comprising a $5 billion facility from First Abu Dhabi Bank to support the national budget and a $1 billion UK export-finance facility arranged by Citibank for the rehabilitation of Tin Can Island Port and Lagos Port Complex.

Eze Onyekpere, lead director of the Centre for Social Justice, said the use of borrowed funds was more important than the act of borrowing itself.

“We do not have much problem with collecting loans, but what you actually do with borrowed funds, and so that is the critical challenge of Nigeria. The law is clear that you only borrow for capital expenditure, capital regenerative expenditure or human capital development,” he said.

Five ways Nigeria can projects without more debt

Economists who spoke to BusinessDay have also argued that there are other ways which the federal government could fund projects without incurring more debt. The Economists said this while also reacting to Nigeria’s FGs target of raising funds to finance capital projects.

Sylvester Anaba, head of research at United Capital, said the government must distinguish between proposed project values and capital actually committed.

“The critical question is not merely whether Nigeria can attract $78.5 billion, but whether it can structure and execute the projects in ways that make them sufficiently attractive to private investors without transferring excessive risks and liabilities back to the government,” he said.

Ayo Teriba, chief executive officer of Economics Associates, said equity financing would allow investors to share ownership and risks without fixed interest obligations.

Here are five ways Nigeria could mobilise the capital.

Attract domestic and foreign equity

The government could invite domestic companies, foreign infrastructure funds, private equity firms and sovereign wealth funds to finance commercially viable projects in exchange for ownership stakes and future profits.

Teriba said wider access to investment opportunities would allow investors to assess expected returns.

“The more equity you can raise, the more you can use equity to refinance outstanding debt and crash interest rates,” he said.

Unlock idle assets

Nigeria could raise funds through the sale of selected public assets, concessions, long-term leases and strategic divestments.

PwC estimates that N180 trillion in trapped, dead and idle assets could be unlocked through restructuring and more productive use.

Anaba said proceeds from asset recycling should be directed towards productive investment. However, some assets may be encumbered or require substantial investment before they can generate returns.

Mobilise pension funds

Nigeria’s pension assets rose 51 percent to N31.48 trillion, according to the National Pension Commission.

Pension funds, insurers and asset managers could invest in infrastructure through project bonds, equity stakes and professionally managed funds.

Anaba said investments would require competitive returns, adequate liquidity and credible project structures to protect contributors’ savings.

Reform electricity to attract investors

Rafiq Raji, a member of BusinessDay’s Board of Economists, said electricity market reform, particularly the gas-to-power value chain, was essential to attracting large-scale investment.

He called for full electricity market liberalisation and a willing-buyer, willing-seller model for electricity and gas pricing.

Raji estimated that at least $50 billion could be mobilised from commercial banks, pension funds and African development finance institutions to help meet an estimated $12 billion annual financing requirement for a liberalised electricity sector.

Expand public-private partnerships and diaspora investment

Private companies could finance, build and operate roads, ports, terminals and electricity infrastructure, recovering investments through tolls, tariffs and user charges.

However, Anaba warned that poorly structured government guarantees and minimum-revenue commitments could create future liabilities for taxpayers.

Diaspora investment could also be mobilised through regulated infrastructure funds and project-specific investment vehicles, supported by transparent reporting and credible oversight.

Execution remains critical

Anaba said Nigeria should prioritise commercially viable projects with credible feasibility studies, predictable cash flows and clear risk-sharing arrangements.

High interest rates, inflation and exchange rate volatility could weaken project returns, particularly where costs are denominated in foreign currencies but revenues are earned in naira.

Teriba argued that the $78.5 billion target should be a starting point for attracting private capital rather than an upper limit. (BusinessDay)