Nigeria’s Borrowing Needs Could Surpass N13tn in 2025, Analysts Warn
Nigeria’s borrowing requirements for 2025 may exceed the anticipated N13tn, as analysts at Afrinvest Research project that at least N13.7tn in net issuances will be needed to bridge the gap between proposed expenditure and revenue in the federal budget. This development comes amidst mounting concerns over the nation’s rising debt burden and the strain on domestic financial markets.
The 2025 Federal Government budget, themed “Budget of Restoration: Securing Peace, Rebuilding Prosperity,” is set at N49.7tn, anchored on an ambitious revenue target of N36.35tn. The revenue projections rely on improved non-oil revenue sources, including expanded tax collections, customs duties, and income from government-owned enterprises, alongside oil revenues predicated on a $75 per barrel benchmark, a production target of 2.06 million barrels per day, and an exchange rate of N1,500 to the dollar.
Despite these optimistic revenue projections, the fiscal deficit is pegged at N13.39tn—3.96% of GDP—and is slated to be financed through domestic and external borrowings, as well as public-private partnerships.
Afrinvest’s outlook report, however, suggests that the government may need to borrow even more than planned. “We estimate that domestic borrowing could exceed the target, requiring net issuances of N13.7tn minimum in 2025,” the analysts stated. They also hinted at the likelihood of a Eurobond issuance during the year, further escalating Nigeria’s external debt profile.
The analysts predict significant pressure on the domestic market, with treasury bills expected to account for N12.47tn and Open Market Operations (OMO) sales adding N11.34tn to the borrowing mix. Total inflows are anticipated to peak in the first quarter at N9.08tn, highlighting liquidity challenges as banks also prepare for recapitalisation.
This fiscal outlook comes on the heels of Nigeria’s return to the international debt market in November 2024, after a two-year hiatus. The government issued $2.2bn in Eurobonds, which were oversubscribed by more than $9bn. However, the high coupon rates—9.625% for the 6.5-year bond and 10.375% for the 10-year tranche—underscore the elevated costs of Nigeria’s borrowing.
Economist and CEO of Economic Associates, Dr. Ayo Teriba, has voiced concerns about Nigeria’s borrowing strategy. “It’s not just about whether to borrow but how to borrow efficiently,” Teriba said. “We borrow at some of the highest rates globally, whether domestically or internationally. A third of the budget is now consumed by interest payments alone.”
Teriba also criticised the government’s over-reliance on debt, urging a pivot to equity financing. “The Nigerian government supports a thriving equity market but doesn’t leverage it. No state-owned company raises equity at home or abroad, yet we continually issue debt,” he noted.
At the Institute of Capital Market Registrars’ annual conference, Teriba called for the securitisation of Nigeria’s N41tn in public assets to diversify funding sources and ease the debt burden.
As the federal government prepares for another year of ambitious spending, questions linger over the sustainability of its borrowing strategy and the potential consequences for an economy already grappling with high inflation, currency devaluation, and limited fiscal space.
