Nigeria’s National Assembly has approved President Bola Tinubu’s plan to borrow $2.35 billion to bridge the country’s 2025 budget deficit, alongside issuing a debut $500 million sovereign sukuk in the international capital market. The Senate and House of Representatives gave their approval on Wednesday after considering the report of the joint committee on aids, loans, and debt management, clearing the way for the federal government to pursue fresh borrowing amid persistent fiscal strain.
The approved borrowing package includes ₦1.84 trillion ($1.23 billion) in new external loans provided for in the 2025 Appropriation Act, which will partly finance the ₦9.28 trillion shortfall in the federal budget. According to President Tinubu, the funds will be raised through eurobonds, syndicated loans, or bridge financing, depending on market conditions. He noted that expected yields would align with Nigeria’s outstanding sovereign bonds, currently trading between 6.8 and 9.3 percent, reflecting moderate investor confidence in the country’s credit outlook despite economic headwinds.
Tinubu’s borrowing plan reflects a delicate balance between sustaining public expenditure and addressing the widening fiscal gap caused by subdued oil revenues, a volatile exchange rate, and rising debt servicing costs. Nigeria’s debt profile has expanded sharply in recent years, with total public debt reaching ₦121 trillion ($79.6 billion) as of mid-2025, according to the Debt Management Office (DMO). The federal government’s ability to raise funds from both domestic and external markets has therefore become critical to maintaining liquidity for key developmental and infrastructural programmes.
The planned $500 million sovereign sukuk marks Nigeria’s first attempt to tap the international Islamic finance market, signalling a strategic shift in the government’s debt diversification efforts. Sukuk bonds, which comply with Islamic finance principles prohibiting interest payments, are typically backed by tangible assets and used to finance infrastructure projects. Tinubu said the proceeds from the sukuk would be directed towards critical infrastructure, particularly roads, transport, and energy projects that have suffered from chronic underfunding.
Importantly, up to 25 percent of the sukuk proceeds may be used to refinance high-cost existing debt, a move aimed at reducing the government’s overall interest burden. Analysts view this as a prudent approach, given that Nigeria’s debt service-to-revenue ratio remains among the highest globally, hovering around 73 percent in 2024 according to the World Bank. By replacing expensive short-term debt with longer-tenured sukuk financing, Nigeria could improve its debt sustainability metrics while enhancing investor confidence in its fiscal management.
The approval also comes amid a tightening global financial environment, with borrowing costs elevated following successive interest rate hikes in major economies. Despite this, Nigeria’s eurobond performance has shown relative resilience, buoyed by improving oil production and policy reforms such as the unification of the foreign exchange market. Investors have also reacted positively to the government’s commitment to subsidy reforms and fiscal discipline, though persistent inflation and currency volatility remain concerns.
Economists note that while the new borrowing provides fiscal breathing space, it also underscores Nigeria’s continued dependence on debt to fund recurrent and capital spending. The fiscal deficit for 2025 represents about 3.9 percent of GDP, above the 3 percent threshold recommended by the Fiscal Responsibility Act. Critics argue that sustained borrowing without parallel revenue growth could exacerbate Nigeria’s debt vulnerability, especially if external conditions worsen or oil revenues underperform.
However, proponents of the move argue that the government’s fiscal strategy is consistent with its broader economic reform agenda, which seeks to stimulate growth through targeted infrastructure investment and improved public sector efficiency. They highlight that infrastructure financing remains a key constraint on Nigeria’s competitiveness, with the World Economic Forum ranking the country low in infrastructure quality compared to regional peers. If efficiently deployed, the proceeds from the sukuk and external loans could provide a needed boost to the transport, power, and industrial sectors, helping to create jobs and enhance productivity.
The development also reflects growing interest in Nigeria’s sovereign debt instruments, as foreign investors seek higher yields in frontier markets. Nigeria has successfully issued eurobonds worth over $15 billion since its debut in 2011, and the addition of a sovereign sukuk could broaden its investor base, attracting capital from the Middle East and other Islamic finance hubs.
Still, questions remain about implementation capacity and transparency in the use of borrowed funds. Civil society groups have repeatedly called for greater accountability in debt utilisation, warning that without rigorous oversight, new borrowings risk deepening Nigeria’s fiscal challenges rather than alleviating them.
For now, the National Assembly’s approval gives President Tinubu’s administration the fiscal space to pursue its budgetary commitments while signalling continuity in Nigeria’s reliance on external financing. Whether this borrowing will translate into tangible economic recovery will depend on how effectively the funds are managed, how quickly infrastructural projects are executed, and how firmly the government can sustain its ongoing reforms to boost non-oil revenues and restore macroeconomic stability.
