There are projections that Nigeria’s federal government borrowings could surpass the planned N13 trillion to bridge the budget deficit for 2025. In its 2025 Outlook Report, Afrinvest Research analysts estimated that the net issuances required could be at least N13.7 trillion, potentially including a Eurobond market offering, as the government aims to address the gap between proposed expenditure and revenue.
Overview of the 2025 Budget Proposal
The 2025 Federal Government budget, titled ‘Budget of Restoration: Securing Peace, Rebuilding Prosperity,’ is set at N49.7 trillion, with a revenue target of N36.35 trillion, which relies heavily on increased non-oil revenue generation. This includes expanded tax collections, customs duties, and revenue from government-owned enterprises. The government also projects oil revenues based on a crude oil benchmark of $75 per barrel, a daily production target of 2.06 million barrels, and an exchange rate of N1,500 to the US dollar.
The proposed budget includes a fiscal deficit of N13.39 trillion, or 3.96% of GDP, to be financed by a mix of domestic and external borrowings and public-private partnerships. Afrinvest analysts noted that while the government planned domestic and foreign borrowings of N7.4 trillion and N1.8 trillion, respectively, they projected domestic borrowing to exceed this target, requiring a minimum net issuance of N13.7 trillion in 2025.
Debt Issuance and Market Pressure
The analysts also projected inflows from maturing bills and coupon payments to total N28.45 trillion, with outflows via gross paper supply at N37.5 trillion. Treasury bills are expected to generate the highest inflow of N12.47 trillion, followed by Open Market Operations (OMO) sales at N11.34 trillion. They anticipate the highest inflow will occur in the first quarter, amounting to N9.08 trillion.
The report highlights that the country’s return to the international debt market in November 2024 with a dual-tranche Eurobond offering to finance the 2024 fiscal deficit was oversubscribed, receiving more than $9 billion in bids. However, the government only accepted $2.2 billion from the offering, which consisted of a $700 million Eurobond maturing in 2031 and a $1.5 billion 10-year bond.
Concerns Over Nigeria’s Debt Situation
Economist Dr. Ayo Teriba, CEO of Economic Associates, expressed concerns about Nigeria’s debt management, emphasizing that the country borrows at high rates both domestically and internationally. He argued that the government should focus more on equity financing rather than relying heavily on debt to fund the deficit. He noted that other countries with similar-sized economies borrow more efficiently by issuing higher-grade bonds, which attract lower interest rates.
Dr. Teriba also called for the securitization of Nigeria’s N41 trillion worth of assets to enhance the country’s financial resources. He further stressed that continuing to fund the deficit through debt alone is unsustainable and that Nigeria should explore alternative financing options, including equity markets.
The growing concerns about Nigeria’s rising debt highlight the challenges the country faces in balancing fiscal management with economic growth, especially as it looks to meet its revenue targets and address the financing of its budget deficit.
