FG Exceeds 2024 Borrowing Target By N4 Trillion: Implications For Nigeria’s Economy

Introduction
As Nigeria grapples with rising debt levels, the Federal Government (FG) has significantly exceeded its domestic borrowing target for 2024. With President Bola Tinubu poised to present the 2025 national budget to the National Assembly, borrowing remains a critical issue. The FG has already surpassed its 2024 borrowing limit by N4 trillion—67% higher than initially planned—raising concerns about the sustainability of Nigeria’s debt profile and its broader economic implications.

A Closer Look at 2024 Borrowing Trends

The Federal Government’s domestic borrowing activities between January and November 2024 reveal an alarming trend. According to reports, the FG borrowed N8.93 trillion in just 11 months, far exceeding the N6 trillion planned for the entire year. Projections indicate that total borrowing for 2024 could reach N10 trillion, representing a 67% overshoot of the year’s target.

Breakdown of Borrowing Sources
Key data from the Debt Management Office (DMO) and the Central Bank of Nigeria (CBN) highlight the distribution of borrowing activities:

Treasury Bills (NTBs): N1.181 trillion in Q3 2024.
FGN Bonds: N939.246 billion.
Savings Bonds: N14 billion in Q3 2024 alone.

Further, in October and November, the FG raised an additional N774.953 billion through NTBs and N635.752 billion via FGN Bonds, with Savings Bonds contributing N7.152 billion.

2024 Debt Stock and Its Implications
By the end of the first half of 2024 (H1 2024), the FG’s domestic debt stock reached N66.957 trillion—a 38.6% increase compared to H1 2023. Treasury Bills accounted for a significant share of this rise, with borrowing through NTBs surging to N11.8 trillion in H1 2024 from N4.7 trillion in H1 2023.

The dominance of FGN Bonds was evident, constituting 78.13% of total FG borrowing during the period, climbing to N52.315 trillion from N41.722 trillion in H1 2023. Savings Bonds and Sukuk Bonds also recorded increases, albeit at a smaller scale.

The Fiscal Outlook for 2025
The Federal Government plans to finance the 2025 budget deficit—estimated at N9.22 trillion—through domestic and external borrowing, privatization proceeds, and multilateral loans. Analysts warn that this reliance on borrowing is unsustainable, particularly with domestic borrowing likely to dominate due to limited external financing opportunities.

Economic Concerns: Insights from Analysts

Experts have expressed concerns about the FG’s rising debt levels and borrowing costs:

Inflationary Pressures: The increase in borrowing, coupled with a high-interest rate regime, has fueled inflation as businesses pass on higher costs to consumers.
Crowding-Out Effect: Private sector borrowing is becoming costlier, limiting access to credit for businesses.
Debt Sustainability: Analysts emphasize the need for Nigeria to adopt a sustainable debt-to-revenue and debt-to-GDP ratio to avoid a potential sovereign default.

Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the risk of overheating the economy due to excessive borrowing. He noted that while debt funded through Treasury Bills or bonds is less inflationary, it still exerts significant pressure on the private sector.

Moving Forward: Policy Recommendations

Strategic Debt Utilization: Experts recommend prioritizing infrastructure and production-boosting projects to justify borrowing.
Fiscal Responsibility: The government must moderate borrowing and focus on policies that enhance economic productivity.
Debt Management: Adopting a framework for debt sustainability, with a focus on reducing debt-service costs and avoiding excessive reliance on external loans.

Victor Chiazor, Head of Research at Fidelity Securities Limited, urged the FG to ensure that borrowing supports initiatives that stimulate economic growth and stabilize exchange rates.

Conclusion
The FG’s overshooting of its 2024 borrowing target by N4 trillion underscores the urgent need for fiscal discipline and a strategic approach to debt management. As Nigeria prepares for the 2025 budget, policymakers must balance borrowing needs with sustainable economic growth to avoid further economic challenges.