Unprecedented Borrowing Surge: FG Set To Overshoot N4 Trillion In 2024

Unprecedented Borrowing Surge: FG Set To Overshoot N4 Trillion In 2024

As President Bola Tinubu prepares to present the 2025 national budget, largely reliant on borrowings, to the National Assembly tomorrow, the Federal Government (FG) is set to surpass its 2024 domestic borrowing target by a staggering N4 trillion,…Unprecedented Borrowing Surge: FG Set To Overshoot N4 Trillion In 2024

a 67% increase over the originally planned amount.

This comes amid growing concerns over Nigeria’s rising national debt. Data for the first eleven months of 2024 indicates that the FG has already borrowed more than N2.93 trillion, 49% higher than the set target. By the end of the year, the total domestic borrowing could reach N10 trillion, far exceeding the N6 trillion initially planned.

In addition to these figures, the government plans to finance a substantial portion of the 2025 budget deficit through both domestic and foreign borrowings, totaling N9.22 trillion. This amount marks an 18% increase over the N7.808 trillion allocated for 2024.

Breakdown of 2024 Borrowing Activities

Reports from the Debt Management Office (DMO) and the Central Bank of Nigeria (CBN) reveal that in Q3 2024, the FG borrowed N2.134 trillion through various domestic instruments such as Nigeria Treasury Bills (NTBs), FGN Bonds, and FGN Savings Bonds. This borrowing trend continued through October and November, with the FG borrowing an additional N774.953 billion via NTBs and FGN Savings Bonds.

Increased Debt Burden in H1 2024

As of the first half of 2024, the FG’s domestic debt stock had reached N66.957 trillion, a significant 38.6% increase from the previous year. The borrowing included N11.8 trillion through NTBs, representing 17.64% of total borrowing, and N52.315 trillion through monthly FGN Bond auctions.

Experts’ Views on the Debt Surge

Analysts attribute the excess borrowing to a high-interest rate environment, driven by an 875 basis point increase in the CBN’s Monetary Policy Rate (MPR) from February to November 2024. These elevated rates have made government debt more attractive to investors but also increased borrowing costs for businesses, which are now facing higher interest rates on loans.

David Adonri, Executive Vice Chairman at Highcap Securities, warns that this rapid borrowing may lead to a sovereign debt trap, where new debt is used to service existing obligations, leaving little room for economic development. He also expressed concerns over the crowding-out effect, where rising government debt takes up more of the available credit, making it harder for the private sector to access affordable financing.

Victor Chiazor, Head of Research at Fidelity Securities, pointed out the inflationary pressures caused by the government’s borrowing spree, which also affects exchange rates and the private sector’s borrowing capacity.

Concerns Over Debt Sustainability

Experts like Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), caution that while borrowing can be useful for financing projects, it becomes problematic if it leads to an unsustainable debt trajectory or if the funds are not used for productive investments. Olatunde Amolegbe, former President of the Chartered Institute of Stockbrokers, agrees, emphasizing the importance of borrowing for growth-enhancing projects rather than recurrent expenditures.

In sum, while the government’s borrowing is being driven by attractive interest rates and the need to fund national development, analysts warn that without proper management and targeted investment, the rising debt could become a serious burden on the economy, affecting both fiscal and monetary policies.

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