PUNCH
The Federal Government plans to allocate a significant portion of its budget to debt servicing over the next three years, surpassing allocations for capital expenditures.
This is according to the recently approved 2025-2027 Medium-Term Expenditure Framework and Fiscal Strategy Paper.
To fund its expenditure plans, the government also intends to borrow an additional N31.24tn over the next three years.
This will add to Nigeria’s already substantial debt stock, which stood at N134.3tn as of June 2024. If this borrowing trend continues, Nigeria’s debt stock could be near N170tn by 2027.
The planned borrowing will primarily finance budget deficits and other expenditures, potentially pushing Nigeria’s debt-to-revenue ratio further into unsustainable territory.
The government intends to borrow N9.22tn in 2025, increasing to N8.78tn in 2026 and N13.24tn by 2027.
Of the total N31.24tn, domestic borrowing will account for the lion’s share at N24.98tn, while foreign borrowing will contribute N6.25tn.
For 2025, domestic borrowing is pegged at N7.37tn, which is 80 per cent of the borrowing projection for the year, while foreign borrowing will make up N1.84tn.
This pattern is expected to continue, with domestic borrowing set at N8.78tn in 2026 and N10.59tn in 2027.
Foreign loans, on the other hand, will rise modestly, from N1.76tn in 2026 to N2.65tn in 2027.
The fresh borrowings will be used to fund the government’s widening budget deficits, which are projected at N13.08tn in 2025, N12.14tn in 2026, and N13.76tn in 2027.
The deficits reflect the ongoing struggle to bridge the gap between revenues and expenditure, despite recent fiscal reforms such as the removal of fuel subsidies and exchange rate unification.
The deficits, representing 3.87 per cent of GDP in 2025 and narrowing slightly to 3.01 per cent by 2027, highlight the government’s growing reliance on debt to fund its spending priorities.
The MTEF document further reveals that debt servicing is projected to cost N50.39tn between 2025 and 2027, exceeding the N48.93tn set aside for capital expenditures.
