President Bola Tinubu has submitted a request to the National Assembly seeking approval for a fresh external borrowing plan amounting to N1.767 trillion. This loan, if approved, will be used to help finance the N9.7 trillion budget deficit in the 2024 appropriation act.
The president’s request was formally read by the Speaker during plenary on Tuesday. Along with the borrowing plan, President Tinubu also forwarded the Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for 2025-2027 to Parliament. Additionally, he introduced the National Social Investment Programme Establishment Amendment Bill, which aims to make the social register the primary tool for implementing the federal government’s social welfare programs.
This development follows a recent report from the Central Bank of Nigeria (CBN), revealing that the federal government spent $3.58 billion servicing Nigeria’s foreign debt in the first nine months of 2024. This figure represents a significant 39.77 percent increase compared to the $2.56 billion spent in the same period of 2023.
According to the CBN’s international payment statistics, the highest monthly foreign debt servicing payment in 2024 occurred in May, amounting to $854.37 million, marking a 286.52 percent increase from $221.05 million in May 2023. Other months showed varying trends, with significant spikes, such as in January 2024, where payments surged by 398.89 percent to $560.52 million from $112.35 million in January 2023.
The data highlights the rising pressure of Nigeria’s foreign debt obligations, a trend that has raised concerns, particularly given the rising exchange rates. As of June 2024, Nigeria’s foreign debt servicing continued to place significant strain on the nation’s finances.
On Monday, Channels Television reported that the debts of Nigeria’s 36 states rose to N11.47 trillion as of June 30, 2024, despite allocations from the Federal Accounts Allocation Committee (FAAC) and states’ internally generated revenues (IGR). The increase marks a 14.57 percent rise from the N10.01 trillion recorded in December 2023. The report also noted that the external debt of the states and the Federal Capital Territory (FCT) rose from $4.61 billion to $4.89 billion in the same period.
Further analysis revealed that the devaluation of the naira contributed to a significant rise in states’ debt in naira terms. From December 2023 to June 2024, the naira value of state debt surged by 73.46 percent, from N4.15 trillion to N7.2 trillion. However, domestic debt for the states and the FCT declined from N5.86 trillion to N4.27 trillion.
The increased foreign debt and the rising cost of borrowing are compounded by the states’ continued reliance on federal allocations to finance their budgets. According to BudgIT’s 2024 State of States report, the total debt stock of the 36 states surged by 38.1 percent, from N7.25 trillion in 2022 to N10.01 trillion in 2023. This growth was primarily driven by a N606.12 billion increase in domestic debt.
The report also highlighted that states’ reliance on FAAC for revenue was particularly pronounced, with 32 states depending on FAAC receipts for at least 55 percent of their total revenue. Moreover, the report noted the vulnerability of state governments to external financial shocks, especially in light of the fluctuations in crude oil prices and the effects of exchange rate liberalization.
“32 states relied on FAAC receipts for at least 55 percent of their total revenue, while 14 states depended on FAAC for at least 70 percent of their total revenue,” the report said. “This highlights the over-reliance of state governments on federally distributable revenue and underscores their vulnerability to external financial shocks.”
This situation, coupled with the rising debt burden, has further strained the financial sustainability of Nigeria’s sub-national governments. Despite the challenges, the combined revenue of all 36 states in 2023 rose by 31.2 percent, indicating improvements in fiscal performance, though the reliance on federal transfers remains a significant concern.
