As the Federal Government, FG, ramps up borrowings, concerns are mounting across the various private sector groups and economic experts on the impact of the escalating debt on businesses and the economy in general.

Meanwhile, with recent National Assembly approvals of further borrowings, Nigeria’s public debt is likely to cross the N200 trillion mark by end of the current fiscal year if the approvals are implemented in full.

It was recorded at N149.4 trillion as of the first quarter of 2025, Q1’25.

Vanguard findings at the backdrop of fresh borrowings initiated by the FG during the week show that the current administration is set to surpass previous regimes in debt accumulation despite the criticism that followed the massive borrowings between 2015 and 2023.

Some of the findings show that while the late President Muhammadu Buhari ran aggressive borrowing at the rate of N4.7 trillion per annum across eight years, the current President Bola Tinubu is running on N49.8 trillion per annum across two years. This also implies that Nigeria’s total public debt, which grew at 39.1 percentage points annually under Buhari, is now growing at an annualised rate of 99.8 percentage points.

The breakdown shows that Tinubu’s debt burden has worsened by Naira depreciation.

While Buhari ran a foreign loan profile at $4.15 billion annual average across his eight year tenor, Tinubu is doing just $1.7 billion annual average across two years.

However, when denominated in Naira, Buhari’s regime ran on average N2.2 trillion per annum across the eight years, but Tinubu is currently running on N25.5 trillion foreign loan per annum.

With this development, Tinubu’s foreign loan profile is growing at the rate of 130 percentage points annual average as against Buhari’s 119.1 percentage point.

Further breakdown shows that on the domestic loan, Tinubu is showing far more aggressive borrowing as the growth rate hits 101.5 percentage points across the two years as against Buhari’s 23.9 percentage points across the eight years.

This week the Senate approved a global borrowing plan amounting $21.5 billion while the House of Representatives approved $347 million.

Fiscal policy experts see the total public debt further ballooning to over N200 trillion upon execution of these approvals before end of this fiscal year.

The bulk of the indebtedness is with the Eurobond, World Bank Group, African Development Bank Group, Exim Bank of China, and Agence Francaise Development (France).

Ripple effect devastating for small businesses — ASBON
Commenting on the debt profile, President of the Association of Small Business Owners of Nigeria (ASBON), Dr Femi Egbesola, said that the ripple effect of the rising debt situation is devastating for small businesses in the country.
He stated: “Nigeria’s rising debt profile is a growing concern, especially when the borrowings are not transparently tied to productive investments or infrastructure that directly stimulates economic growth.

‘‘While it is understood that borrowing in itself is not inherently bad – if used judiciously – it becomes worrisome when debt servicing gulps a significant portion of government revenue, leaving little room for developmental projects or support for critical sectors like health, education, and MSMEs.

“At the moment, Nigeria is spending more on repaying debts than on stimulating domestic production or providing an enabling environment for businesses to thrive.

“For small businesses, the ripple effect is devastating. High debt servicing pressures often translate into increased taxes, multiple levies, policy instability, and reduced government support for the private sector.

‘‘This weakens investor confidence, stifles productivity, and limits access to credit.”

Egbesola further said: “To safeguard the future of Nigerian businesses and the broader economy, we must prioritize revenue generation through diversification, improved tax efficiency, not just increased rates, plugging leakages, and channeling borrowings strictly into productive sectors with measurable return on investment (ROI). ‘‘Responsible borrowing backed by transparency and fiscal discipline is the only sustainable path forward.”

LCCI reiterates need for revenue diversification
Also commenting, President of the Lagos Chamber of Commerce and Industry (LCCI), Gabriel Idahosa, urged the Federal Government to pursue revenue diversification among other options, to help the country out of the debt quagmire.

His words: “The continued increase in debt stock is primarily attributed to new borrowings by the Federal Government and the depreciation of the Naira, which inflated the local currency value of Nigeria’s external loans.

“Significantly, although the actual rise in external debt in dollar terms was modest, the weakening naira exchange rate used in Q1 2025 amplified the debt in local currency terms.

“Instruments such as bonds, treasury bills, sukuk, and green bonds continue to underpin domestic borrowing, which – while insulated from currency volatility -raises concerns about rising interest rates and the crowding out of private sector credit.

“LCCI remains concerned about the sustainability of the rising debt trajectory and urges the Federal Government to pursue revenue diversification, improved spending efficiency, and better debt management strategies to reduce fiscal pressure and restore macroeconomic stability.”

Capacity to repay should be a major concern — Stockbroker
Also commenting, Olatunde Amolegbe, former President, Chartered Institute of Stockbrokers, CIS, said: “It is well known that the budget deficit projected for 2025 needed to be covered primarily through a combination of external and domestic borrowing. This new loan is probably in fulfillment of that.

“Borrowings from multilateral bodies typically come at relatively variable terms relative to commercial borrowing and this is expected to be the case for this new $21.5 billion loan.

“For me, borrowing in itself is not a problem as long as the capacity to meet up with repayment obligations, as at when due is there.

‘‘It is, however, important that we pay particular attention to application and usage of the loans.”

Borrowing could be fruitful if tied to reforms, projects —Egbomeade
Reacting to the new borrowings, Clifford Egbomeade, economy analyst and communications expert said: “President Tinubu’s request to borrow $21.5 billion externally and issue a domestic bond of N757.9 billion to settle pension liabilities is a significant move that could have both short and long-term implications.

‘‘On one hand, settling outstanding pension obligations can provide immediate relief for retirees and help stimulate domestic consumption, which supports economic activity. Similarly, if the external loans are concessional and targeted at productive sectors like agriculture, job creation, and infrastructure, they could contribute to broader economic development.

“That said, Nigeria’s current debt profile is already high, with total public debt at N144.7 trillion (about $94.2 billion) as of December 2024. Debt servicing costs remain a major concern, taking up a large share of government revenue. “So, while these measures could help address urgent social and economic needs, their success will largely depend on how efficiently the funds are used and whether they are tied to reforms that boost revenue and reduce waste.

‘‘Careful planning and transparency will be key to ensuring these efforts strengthen the economy, rather than deepen fiscal strain”.

There is need for caution —Abidoye
On his part, Tunde Abidoye, Head of Equity Research, FBNQuest Merchant Bank, said: “I believe some caution is now very necessary given the potential rise in debt service cost, and the inherent exchange rate risks associated with foreign denominated borrowings. This also has implications for the fiscal space.

“I would go on to add that it is becoming increasingly important for the DMO (Debt Management Office) to do a new fiscal strategy paper. The last one done stipulates a public debt to GDP ratio of 40%. Nigeria’s total public debt was roughly around 52% of GDP in 2024. ‘‘The new loans being proposed imply that the debt to GDP ratio will rise significantly beyond this point, possibly close to 64% of GDP.”