President Bola Tinubu has requested the National Assembly’s approval for a new external borrowing plan of N1.767 trillion to address the N9.7 trillion budget deficit in the 2024 appropriation act.
This request was presented during Tuesday’s plenary session.
In addition to the loan request, President Tinubu also submitted the 2025–2027 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) and the National Social Investment Programme Establishment Amendment Bill.
The amendment seeks to make the social register the primary tool for implementing federal social welfare initiatives.
RISING DEBT AND LOAN SERVICING COSTS
The Central Bank of Nigeria (CBN) recently reported that the Federal Government spent $3.58 billion servicing foreign debts in the first nine months of 2024, a 39.77% increase from the $2.56 billion expended during the same period in 2023.
The CBN data highlighted fluctuations in monthly debt servicing payments, with May 2024 recording the highest payment of $854.37 million, a significant jump from $221.05 million in May 2023.
The trend underscores the escalating burden of Nigeria’s debt obligations amid devaluation pressures.
January 2024 saw a staggering 398.89% rise in servicing costs compared to January 2023. By June 2024, the naira devaluation had driven the total external debt of states and the Federal Capital Territory (FCT) from N4.15 trillion to N7.2 trillion.
STATE DEBT PROFILE
Nigeria’s 36 states and the FCT recorded a combined debt of N11.47 trillion as of June 30, 2024, representing a 14.57% increase from N10.01 trillion in December 2023. The rise was attributed to naira devaluation and increased borrowing. While external debt rose to $4.89 billion during the period, domestic debt declined from N5.86 trillion to N4.27 trillion.
Lagos State emerged as the most indebted in foreign currency, accounting for 26.9% of total external debt, equivalent to $1.24 billion. A recent report by BudgIT revealed that 32 states relied on federal allocations for at least 55% of their total revenue, with 14 states depending on FAAC receipts for over 70% of their income in 2023.
FISCAL CHALLENGES AND SUSTAINABILITY
The report paints a concerning picture of state government’s dependence on federal allocations, making them vulnerable to oil price shocks and external economic factors. While the combined revenue of the 36 states increased by 31.2% to N8.66 trillion in 2023, FAAC allocations contributed significantly to this growth.
The over-reliance on federal transfers, with 62% of recurrent revenues in 34 states coming from the Federation Account, highlights the need for improved internally generated revenue and fiscal sustainability measures across the states.
