Tinubu Falls Short On Promise To Reduce Nigeria's Reliance On Loans As External Debt Hit $42.9Billion By June 2024

In August 2023, President Bola Tinubu promised to ensure that Nigeria’s reliance on loans is reduced.

At the inauguration of the presidential committee on fiscal and tax reforms, the President admitted that debt servicing was consuming Nigeria’s ‘meagre’ resources. He noted that the situation had put the economy in a vicious cycle of borrowing simply to service debts and left almost no scope for socio-economic development.

“A government that cannot properly fund itself will also lack the flexibility or fiscal scope to sensibly manage the economy or respond to external shocks,” he said in August 2023.

“Instead, debt service begins to consume an ever-greater portion of the government’s already meagre revenues.

“This traps the economy in a vicious cycle of borrowing simply to service previous debt and leaves almost no scope for socio-economic development.

“As President, I am determined to end this cycle. On the day of my inauguration, I promised that my administration would address all of the issues impeding investment and economic growth in Nigeria.”

Despite this promise, the administration of President Tinubu has continued to rely heavily on loans, per details published by the Debt Management Office.

As of June 2023, when Tinubu came into office, the public debt profile of the country stood at N87.3 trillion. It grew to N134.2 trillion by June 2024, meaning that the public debt profile of the country grew by N46.9 trillion within a year.

The data shows that as of June 2023, the domestic debt profile of the country stood at N48.3 trillion, but grew to N66.9 trillion by June 2024.

As of June 2024, the external debt profile of the country stood at $42.901 billion.

In December 2024, the World Bank approved another $500 million loan for the country.

A few hours before this report was filed, the World Bank approved another $1.5 billion for the country to cover tax reforms and fuel subsidy removal.

An earlier report noted that at the time of requesting the $500 million loan, the Tinubu administration had already secured 10 loans from the World Bank.

Some of the loans received from the World Bank include women empowerment ($500m), girl’s education ($700m), renewable energy ($750m), economic stabilization reforms ($1.5bn) and resource mobilization reforms ($750m).

Nigeria's substantial debt burden has led to a significant increase in debt servicing expenditures, which has, in turn, limited the government's ability to allocate funds towards essential development projects.

According to the Central Bank of Nigeria's economic report, a whopping N7.9 trillion was spent on debt servicing between the first and third quarters of 2024.

Breaking it down further, the government spent N2.2 trillion in the first quarter, N3.7 trillion in the second quarter, and N2 trillion in the third quarter.

This substantial allocation towards debt servicing has severe implications, as it accounts for approximately 50% of the total expenditure and a staggering 162% of the total revenue generated during the first half of 2024. The situation is concerning, as the government's debt servicing payments surged by 69% in the first half of 2024, reaching N6.04 trillion, compared to N3.58 trillion in the same period in 2023.

In total, since Tinubu emerged as the President of the country, a sum of N10.9 trillion has been spent on debt servicing by the country.

Also, N3 trillion was spent on debt servicing between June and December 2023.

Nigeria is grappling with significant infrastructural deficits across various sectors, including healthcare, education, roads, and more, which has severely impacted the country's economic growth and quality of life.

The lack of adequate infrastructure has resulted in a substantial burden on the economy, with estimates suggesting that Nigeria requires between $100 to $150 billion annually for the next decade to bridge the gap.