The Federal Government has defended its proposed $21.7bn supplementary external borrowing plan, describing it as a strategic investment in critical infrastructure and economic development rather than an attempt to accumulate debt.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, made the clarification on Wednesday while briefing State House correspondents after the Federal Executive Council meeting presided over by President Bola Tinubu in Abuja.
Oyedele said the administration inherited an economy facing severe challenges in May 2023, including high inflation, low foreign reserves, limited access to foreign exchange and mounting debt-servicing obligations. He alleged that the previous administration had printed more than N30tn, equivalent to over $20bn at the time, contributing to inflationary pressures that the country was still experiencing.
The minister disclosed that the council approved 10 memoranda, including financing arrangements for electricity infrastructure, railway development, road construction and modern equipment for the Nigeria Customs Service.
Among the approvals was a €155.9m credit facility from Deutsche Bank and other lenders to upgrade 132/33kV substations under the first phase of the Presidential Power Initiative. The project is expected to improve electricity reliability for households and businesses while reducing energy costs.
Another approval was a $970m syndicated term loan from Standard Chartered and the Africa Finance Corporation to provide rolling stock for the Karu–Maradi rail line. According to Oyedele, the project would strengthen freight transportation, promote regional trade, support the Northern Economic Corridor and reduce logistics costs.
The council also approved a €76.8m credit facility from the ECOWAS Bank for Investment and Development to Bauchi State for transport infrastructure, including rural and urban roads and farm-to-market routes intended to improve food security.
In addition, the government approved investment in non-intrusive inspection scanners, alongside technical support, repairs and maintenance for the Nigeria Customs Service. The equipment is expected to accelerate cargo clearance, reduce smuggling and misclassification, and improve the detection of contraband and illegal weapons.
Borrowing plan covers 46 projects
Defending the broader $21.7bn borrowing proposal, Oyedele said it was a financing plan spanning an average project lifespan of five years and did not mean that the government would necessarily borrow the entire amount immediately.
According to the document presented to the National Assembly, the plan covers 46 projects across 11 sectors, with 29 structured under concessional or blended financing arrangements.
Transportation accounts for approximately $10.6bn, covering major projects such as sections of the Lagos–Calabar and Sokoto–Badagry highways and the Kano–Kaduna Metro Rail. Ten flagship projects account for $12.5bn, representing 58 per cent of the proposed financing.
The social sectors, agriculture, energy, social protection, climate and education are expected to receive a combined $4bn through entirely concessional financing.
The document indicated that approximately $7.9bn would come from multilateral and bilateral development partners. The World Bank is the largest identified contributor, with $5bn at an average interest rate of 2.1 per cent.
The remaining financing is expected from regional development finance institutions, export credit agencies and commercial banks.
Oyedele said the commercial component carried an indicative average interest rate of 7.8 per cent, below the 9.1 to 9.6 per cent yields on Nigeria’s November 2025 Eurobond. He attributed the difference to credit rating improvements by Fitch, Moody’s and S&P.
He added that $4.8bn of the proposed financing was earmarked for subnational governments and agencies. Of this amount, $3.3bn would go directly to states, while $1.45bn would be channelled through agencies and development finance institutions, including the Bank of Industry, Development Bank of Nigeria, Transmission Company of Nigeria and electricity distribution companies.
The minister explained that the Federal Government serves as the constitutional intermediary for external borrowing, stressing that the entire amount should not be interpreted as borrowing solely for the Federal Government.
Using the Dangote Refinery as an example, Oyedele argued that borrowing could create economic value when investments generate returns greater than their financing costs. He maintained that the proposed projects would support economic growth and infrastructure development.
Government highlights economic indicators
Providing an overview of the economy, Oyedele said inflation stood at 22.41 per cent in May 2023, while net foreign reserves were approximately $859m, insufficient to cover one month of imports.
He also cited a premium of more than 60 per cent between the official and parallel foreign exchange markets at the time, alongside debt servicing that consumed 97 per cent of government revenue. According to him, about 27 states were struggling to pay salaries and had outstanding pension and gratuity obligations.
The minister said economic reforms had helped prevent a more severe crisis, including hyperinflation and a deeper collapse of the currency.
On petrol subsidy removal, Oyedele traced the policy to 1973, when petrol sold for six kobo per litre. By the time the subsidy was removed in 2023, the price had reached N195 per litre, representing a 3,050-fold increase over five decades.
He argued that previous price increases had imposed hardship without resolving the underlying fiscal problem, adding that the current reforms were beginning to produce benefits for the country.
Oyedele said economic growth had risen from 2.74 per cent in May 2023 to 4.43 per cent in the second quarter of 2026. He also put Nigeria’s dollar-denominated growth rate for the first half of 2026 at 17 per cent, describing the country as one of the major contributors to global economic growth.
According to the minister, inflation fell to 14.63 per cent in September 2026 from 20.98 per cent a year earlier and a peak of about 34 per cent during the period of intense inflationary pressure. He also reported a 1.55 per cent decline in month-on-month food inflation.
Foreign reserves, he said, had climbed to an 18-year high of more than $55bn, with net reserves exceeding $45bn compared with less than $1bn three years earlier.
Oyedele added that the naira was trading between N1,330 and N1,350 to the dollar and expressed optimism about its future performance. He cited an International Monetary Fund assessment that the currency was approximately 25 per cent undervalued.
The minister further stated that Nigeria’s tax-to-GDP ratio had increased from about seven per cent in 2023 to approximately 12.5 per cent at the end of 2025, while the debt-service-to-revenue ratio had declined from 97 per cent to below 60 per cent.
Federation Account allocations increased by 44 per cent between 2024 and 2025, with the government projecting a further 50 per cent increase between 2025 and 2026. Oyedele also reported credit rating upgrades from Fitch, Moody’s and S&P, alongside Nigeria’s exit from the Financial Action Task Force grey list and the European Union’s deficiency list.
Government outlines support measures
Addressing concerns that improved economic indicators had yet to translate into better living conditions for many Nigerians, Oyedele highlighted several government intervention programmes.
He said the Nigerian Education Loan Fund had disbursed N372.6bn to more than 1.5 million students to support tuition and stipends.
More than 10 million households had also received cash transfers worth over N600bn, while the government’s target was to reach at least 15 million households.
The minister added that over 800,000 micro, small and medium-sized enterprises had benefited from subsidised single-digit interest loans, largely through the Bank of Industry.
According to him, individuals earning up to N100,000 monthly had been exempted from personal income tax. Small businesses with annual turnover of not more than N100m, representing about 97 per cent of more than 40 million small businesses, were also exempted from corporate income tax, VAT obligations and withholding tax deductions under the measures he outlined.
Oyedele said the capital market had expanded from approximately N30tn to more than N160tn in three years, with over 90 per cent of investors classified as small investors who had received capital gains tax exemptions.
Government targets lower food prices
On food affordability, the minister said the Federal Executive Council had adopted a national approach coordinated with state governments through the National Economic Council’s 90-day action plan.
In the short term, the government aims to stabilise or reduce the prices of staple foods, including rice, yam, beans and maize, before the end of the year.
Oyedele said authorities would assess the gap between domestic production and consumption to determine the need for targeted imports. He added that only unprocessed brown rice would be imported under the plan to protect local milling jobs and processing capacity.
Longer-term measures include expanding irrigation, increasing agricultural productivity through science and technology, and reducing post-harvest losses. The government also aims to strengthen food processing and expand agricultural exports.
The council further resolved to pursue single-digit inflation by the end of 2027 or earlier, stabilise food prices and maintain fiscal discipline throughout the election cycle.
The defence of the borrowing proposal comes amid criticism from opposition figures and political groups. Former Vice President and African Democratic Congress presidential candidate Atiku Abubakar had urged the National Assembly to suspend consideration of the request until the Federal Government disclosed the projects the proposed loans would finance.
Source: The Punch
