Money for fighter jets, power grid, food security, others- Finance ministry
The Federal Government yesterday moved to calm frayed nerves over its fresh request to borrow $21.5 billion, €2.2 billion, ¥15 billion Japanese yen, totalling about $25 billion, along with a €65 billion grant and a N758 billion domestic bond.
Nigerians had warmly welcomed news a fortnight ago that the President Bola Ahmed Tinubu administration had paid off Nigeria’s $3.4 billion loan which was extended to the country as a lifeline during the COVID pandemic.
During the COVID-19 pandemic in 2020, Nigeria, like many developing economies, faced a deep economic contraction, plunging oil prices, and mounting healthcare challenges. To cushion the blow, the country turned to the IMF, securing a $3.4 billion loan under the Rapid Financing Instrument (RFI).
The RFI was designed to provide emergency financial assistance to countries experiencing urgent balance of payments needs. Nigeria used the funds to support public health spending, protect vulnerable groups, and stabilize key sectors of the economy. The loan played a crucial role in preventing economic collapse during the pandemic’s most turbulent months.
In a strategic move that boosted global investor confidence in the country, and warmed the hearts and minds of many Nigerians, the President Tinubu administration announced the repayment of the loan two weeks ago.
When the administration made a fresh request to the National Assembly to borrow a fresh $25 billion, along with €65 billion and N758 billion in grants and domestic bond, many Nigerians were worried that the loan trap could actually be deepening rather than abating.
But yesterday, the federal government moved to douse the anxiety, pointing out that the borrowings were manageable and sustainable limits, and in accordance with the Debt Management Office (DMO) debt sustainability framework.
Mohammed Manga, Director, Information and Public Relations of the Ministry of Finance, said in Abuja that the proposed borrowing plan was an essential component of the Medium-Term Expenditure Framework (MTEF) and in accordance with both the Fiscal Responsibility Act 2007 and the DMO Act 2003.
“The plan outlines the external borrowing framework for both the federal and sub-national governments over a three-year period, accompanied by five detailed appendices on the projects, terms and conditions, implementation period, etc.
“By adopting a structured, forward-looking approach, the plan facilitates comprehensive financial planning and avoids the inefficiencies of ad-hoc or reactive borrowing practices.
“This strategic method enhances the country’s ability to implement effective fiscal policies and mobilise development resources,” he said.
According to him, the borrowing plan does not equate to actual borrowing for the period.
“The actual borrowing for each year is contained in the annual budget. In 2025, the external borrowing component is 1.23 billion dollars, and it has not yet been drawn.
“The plan is for both federal and several state governments across numerous geopolitical zones including Abia, Bauchi, Borno, Gombe, Kaduna, Lagos, Niger, Oyo, Sokoto, and Yobe States.
“Importantly, it should be noted that the borrowing rolling plan does not equate to an automatic increase in the nation’s debt burden. The nature of the rolling plan means that borrowings are split over the period of the projects. For example, a large proportion of projects in the 2024–2026 rolling plan have multi-year drawdowns of between five to seven years which are project-tied loans,” Manga said.
He disclosed that these projects cut across critical sectors of the economy, including power grids and transmission lines, irrigation for improving food security, fibre optic networks across the country, fighter jets for security, rail and road infrastructure.
According to him, the majority of the proposed borrowing will be sourced from the country’s development partners, like the World Bank, African Development Bank, French Development Agency, European Investment Bank, JICA, China EximBank, and the Islamic Development Bank.
Manga said that these institutions offer concessional financing with favourable terms and long repayment periods, thereby supporting Nigeria’s development objectives sustainably.
He said that the government seeks to reiterate that the debt service to revenue ratio has started decreasing from its peak of over 90 per cent in 2023.
Manga said that the government has ended the distortionary and inflationary ways and means.
According to him, there are significant revenue expectations from the Nigerian National Petroleum Corporation Limited (NNPC Ltd), technology-enabled monitoring and collection of surpluses from government-owned enterprises and revenue-generating ministries, departments, and agencies, and legacy outstanding dues.
“Having achieved a fair degree of macroeconomic stabilisation, the overarching goal of the federal government is to pivot the economy onto a path of rapid, sustained, and inclusive economic growth.
“Achieving this vision requires substantial investment in critical sectors such as transportation, energy, infrastructure, and agriculture.
“These investments will lay the groundwork for long-term economic diversification and encourage private sector participation.
“Our debt strategy is therefore guided not solely by the size of our obligations, but by the utility, sustainability, and economic returns of the borrowing,” he said.