President Bola Tinubu has formally requested the Senate's approval for a new N1.15 trillion domestic borrowing program, intended to finance an unfunded deficit within Nigeria's 2025 national budget. This crucial request was conveyed in a letter read by Senate President Godswill Akpabio during a recent plenary session, where President Tinubu underscored the necessity of this facility due to an expansion in the 2025 budget's magnitude. The borrowing, he explained, would be sourced from the domestic debt market and aligns with the provisions of Section 44 (1) and (2) of the Fiscal Responsibility Act.

The need for this domestic loan arises from a significant increase in the budget size. The National Assembly ultimately passed a 2025 budget of N59.9 trillion, which represents an increase of N5.25 trillion from the executive's initial proposal of N49.74 trillion. This expansion created a budget deficit of N14 trillion. With the previously approved borrowing for the budget standing at N12.95 trillion, an unfunded deficit of N1.147 trillion remained, which the N1.15 trillion domestic borrowing program is designed to close. Following the reading of the correspondence, Senate President Akpabio referred the proposal to the Senate Committee on Local and Foreign Debt, instructing the committee to provide its report within a week.

This latest domestic borrowing request is part of a series of recent financial maneuvers by the Tinubu administration. Just days prior, the National Assembly had greenlit the President’s request to secure a $2.35 billion external loan, also allocated to the 2025 budget. This external funding is expected to be raised through various instruments, including Eurobond issuance, loan syndications, bridge-finance facilities, or direct borrowing from international financial institutions. Additionally, lawmakers approved the issuance of Nigeria's first-ever Sovereign Sukuk of up to $500 million in the international capital market, aimed at funding infrastructure projects and diversifying national financing sources. These follow earlier approvals from four months prior for $21.5 million and ¥15 billion in loans, coupled with a €65 million grant, all part of the federal government's 2025–2026 external borrowing plan.

Nigeria’s public debt continues its upward trajectory, having reached N144.7 trillion (approximately $94.2 billion) as of December 31, 2024, according to the Debt Management Office (DMO). Domestic debt constitutes 51.4 percent (N74.4 trillion) of this total, with external debt making up the remaining 48.6 percent (N70.3 trillion). This reliance on borrowing, a practice not unique to the current administration, is crucial for financing the nation’s budget, despite the Tinubu administration's claims of increased revenue generation.

The growing debt burden has direct implications for the nation's finances, manifesting in significantly increased debt servicing costs. In 2023, Nigeria allocated N7.8 trillion to debt servicing, marking a 121 percent surge from the N3.52 trillion spent in the preceding year. This figure escalated further in 2024, reaching N13.12 trillion, representing a 68 percent increase from 2023. These substantial expenditures on debt servicing divert crucial funds that could otherwise be invested in vital sectors such as infrastructure and social services, potentially impeding economic growth and overall development.

Despite the mounting fiscal pressures and concerns over rising debt, the Tinubu administration consistently defends its borrowing strategy as an indispensable tool for development financing, especially given the contraction of domestic funding sources. President Tinubu, during a media interaction last December, articulated that his borrowing decisions were driven by a commitment to infrastructural development rather than a desire to inflict hardship on Nigerians, asserting that borrowing is not a crime and is necessary to address widespread decayed infrastructure.

The implementation of these financial plans is complicated by Nigeria's current operational setup of two concurrent budgets within a single fiscal year. This includes the capital component of the 2024 budget, which has seen its lifespan extended twice—first to June 2025 and then to December 2025—alongside the active 2025 budget. The complexity is further compounded by reports from various Ministries, Departments, and Agencies (MDAs) concerning insufficient fund releases for project execution. Speculations suggest that only about 40 percent of the 2024 capital budget's component has been implemented, with work on the 2025 capital component yet to commence, fueling concerns that the 2025 capital budget might also require an extension into 2026.