Nigerian Senate Approves Tinubu's $21.5 Billion External Borrowing Plan for 2025-2026
The Nigerian Senate, on Tuesday, July 22, 2025, approved President Bola Ahmed Tinubu's comprehensive external borrowing plan totaling over $21.5 billion for the 2025-2026 fiscal cycle. This significant approval paves the way for the full implementation of the 2025 Appropriation Act and is intended to address critical development needs across various sectors of the economy.
Composition of the Borrowing Package:
The total financing package approved by the Senate is diverse and comprises:
$21.19 billion in direct foreign loans.
€4 billion in Euro-denominated loans.
¥15 billion in Japanese Yen-denominated loans.
A $65 million grant.
Domestic borrowing through government bonds, specifically totaling approximately ₦757 billion, earmarked for the payment of accrued rights pension arrears as of December 2023 under the Contributory Pension Scheme (CPS).
A provision to raise up to $2 billion through a foreign-currency-denominated instrument in the domestic market. This innovative approach aims to attract local dollar liquidity from the private sector, diaspora remittances, and foreign entities operating in Nigeria, potentially deepening Nigeria's capital market and diversifying funding sources.
Purpose and Targeted Sectors:
President Tinubu has emphasized that these loans are crucial for bridging Nigeria's infrastructure deficit, stimulating job creation, and stabilizing key economic sectors. The approved funds are designated for critical national development projects across a wide range of areas, including:
Infrastructure: A major component is the $3 billion allocation for the revitalization of the Eastern Rail Corridor, which stretches from Port Harcourt to Maiduguri. Other infrastructure projects include enhancements to power grids and transmission lines (e.g., reinforcing 330 kV and 132 kV corridors, replacing aging transformers, installing SCADA systems, constructing new 330 kV lines, and rural electrification), as well as road infrastructure (including a notable $700 million for the Lagos-Calabar Coastal Road and $508 million for modernizing eastern port infrastructure).
Agriculture: Investments are planned for irrigation systems to enhance food security and boost agricultural output.
Security: Funds are allocated for purchasing essential equipment, including fighter jets.
Power: Projects designed to reduce grid collapses and increase overall power supply.
Housing
Digital Connectivity: Development of fiber optics networks.
Education
Health
Water Supply
Human Capital Development
Financial Reforms
Employment Generation: Including a $100 million allocation for a youth entrepreneurship project.
Key Details and Rationale for Approval:
Integration with Budget: The Senate Committee on Appropriations, led by Senator Olamilekan Adeola, confirmed that most of these loan requests had already been incorporated into the Medium-Term Expenditure Framework (MTEF) and the 2025 national budget. This means the borrowing is "already embedded" in the 2025 Appropriation Act, and with this approval, all anticipated revenue sources, including these loans, are now in place to fully fund the budget.
Long-term and Concessional Terms: The approved loans are characterized as long-term and concessional, offering favorable repayment terms with tenors ranging from 20 to 35 years. This aspect is highlighted by proponents as a positive feature of the borrowing plan.
Disbursement Period: Senator Sani Musa clarified that the loan disbursement would span a period of six years, rather than being limited to just 2025, indicating a phased implementation strategy for the projects.
Alignment with Global Practices: Senators advocating for the plan asserted that borrowing for development projects aligns with established global best practices, emphasizing that "no economy grows without borrowing."
Compliance: The loan requests are said to comply with key financial regulations, including the Fiscal Responsibility Act (FRA) and the Debt Management Act, ensuring that funds are strictly tied to capital and human development projects.
Concerns and Criticisms:
Despite widespread support within the Senate, some concerns were voiced. For instance, Senator Abdul Ningi (PDP-Bauchi) questioned the clarity of the committee's report regarding the specific repayment mechanisms for the loans.
Impact on Nigeria's Debt Profile:
Nigeria's public debt remains a significant concern. As of Q1 2025, Nigeria's total public debt stood at ₦149.39 trillion (approximately $97.2 billion), with external debt accounting for ₦70.63 trillion ($45.98 billion). This new borrowing plan will undoubtedly contribute to an increase in Nigeria's overall debt burden.
However, government officials and proponents argue that these loans are crucial for investing in critical infrastructure development. Such investments are expected to boost economic growth, generate future revenues, and ultimately enhance the country's capacity to service its debts in the long run. The administration stresses that these funds are specifically for capital and development projects, distinguishing them from past borrowings that may have been used for consumption or recurrent expenditures.
The approval of this substantial borrowing plan signals a clear commitment from the Tinubu administration to aggressively fund vital infrastructure and other key sectors, with the expectation that these strategic investments will drive economic recovery and foster stability across Nigeria.
I'm Aisha shehu
Talksocialtalka News