Nigeria’s President, Bola Tinubu, who assumed office with promises of reducing reliance on borrowing for public expenditure, has recently faced criticism for seeking approval from the National Assembly for fresh external loans of $7.8 billion and €100 million as part of the 2022-2024 borrowing plan. This move has generated concerns, given Nigeria’s existing debt challenges.
President Tinubu had initially declared that his administration would cut down on borrowing to alleviate the country’s debt service burden and to channel funds into vital areas such as public infrastructure, education, healthcare, and job creation. However, the decision to pursue additional loans, despite the country’s debt challenges, has raised questions about the government’s financial strategy.
Tinubu defended the borrowing request, stating that it had been approved by the Federal Executive Council (FEC) under the previous administration in May 2023 to finance various sectors, including infrastructure, health, education, agriculture, and security. He also mentioned interest from the African Development Bank (AfDB) and the World Bank Group (WBG) to assist Nigeria in mitigating economic shocks and reforms with substantial financial support.
The President asserted that the new loans were necessary to bridge the financial gap and restore economic activities to normal levels. He outlined how the funds would be utilized to develop infrastructure, agriculture, health, education, water supply, security, employment, and financial management reforms.
Despite these explanations, the borrowing request has raised concerns, especially as Nigeria’s total public debt stood at N87.38 trillion at the end of the second quarter of 2023. The additional loans sought by the Tinubu administration are expected to increase the country’s debt burden further.
Critics have also pointed to the items listed in the N2.17 trillion supplementary budget passed by the National Assembly, which includes substantial allocations for items like electrical/mechanical installations and vehicle purchases for the Presidency and First Lady’s office. These allocations have been viewed as ambitious and unnecessary at a time when the government is asking citizens to tighten their belts.
Some have called for a more prudent approach, similar to the one taken by the Lagos State government, which inaugurated a vehicle assembly plant in partnership with a Chinese automobile company. The facility in Lagos is set to produce brand-new cars locally, thereby reducing the need for expensive imported vehicles.
In addition to concerns about the borrowing, there is a call for the government to disclose how much has been saved through the removal of petrol subsidies, as President Tinubu had announced that significant savings would be realized by this action. The lack of transparency in revealing the savings has raised suspicions that the subsidies may have been reintroduced.
To navigate these economic challenges, there is a growing need for the government to focus on improving domestic revenue collection, blocking financial leakages, enhancing tax efficiency, and tackling issues like crude oil theft. Fundamental structural changes are also essential to stimulate economic growth and reduce reliance on external borrowing. This includes unlocking the potential of Nigeria’s natural resources and encouraging private sector-driven initiatives at both federal and state levels to stimulate GDP growth.