As President Bola Tinubu prepares to present the 2025 national budget to the National Assembly tomorrow, which is heavily reliant on borrowing, alarming signs are emerging regarding the Federal Government’s domestic borrowing practices. With concerns about the rising national debt, it appears the government is on track to exceed its 2024 domestic borrowing target by N4 trillion—an overshoot of about 67%.

The latest data reveals that, by November 2024, the Federal Government had already borrowed over N8.93 trillion from domestic investors, far surpassing the N6 trillion it initially planned for the entire year. With this trend continuing, it’s anticipated that total borrowing could reach a staggering N10 trillion by the end of 2024.

Meanwhile, the government’s strategy for financing the 2025 budget deficit, which stands at N9.22 trillion, includes a mix of domestic and foreign borrowings. This is 18% higher than the N7.808 trillion earmarked for 2024. The plan includes new borrowings of N9.22 trillion, along with privatization proceeds of N312.33 billion and N3.55 trillion in drawdowns from existing loans tied to projects. Despite a narrow window for external financing, the majority of the deficit will be covered by domestic borrowings.

In the 11 months of 2024, borrowing via various government securities, including Nigeria Treasury Bills (NTBs) and FGN Bonds, totaled N2.93 trillion—nearly 50% more than the planned target for the year. The Debt Management Office (DMO) and the Central Bank of Nigeria (CBN) show that in Q3 alone, the Federal Government raised N2.134 trillion from domestic investors. Notably, borrowing from NTBs and FGN Bonds accounted for a significant portion of this sum.

The Federal Government’s domestic debt stock surged by 38.6% in the first half of 2024, reaching N66.957 trillion, compared to N48.314 trillion in the same period last year. This increase reflects the government’s mounting reliance on domestic borrowing as a major source of revenue. Analysts point out that a large part of this increase is driven by the rising interest rates following a series of hikes in the Central Bank’s Monetary Policy Rate (MPR), which has risen from 18.75% to 27.5% by November 2024.

While the government’s borrowing strategy may appeal to investors with higher returns on government bonds, the consequences for the broader economy are less clear. Analysts warn that the rapid increase in borrowing could crowd out the private sector, making it more difficult for businesses to access credit at affordable rates. Moreover, these higher interest rates are fueling inflation, further increasing the cost of doing business in the country.

The growing fiscal deficit is already a cause for concern. With the 2024 budget pegged at a total expenditure of N27.5 trillion and revenue expectations at N18.32 trillion, the government faces a budget gap of N9.05 trillion. The gap is expected to be covered by a combination of domestic borrowings, foreign loans, and proceeds from privatization.

Experts argue that while borrowing may be necessary to finance public infrastructure and boost growth, the government must be cautious not to overburden the economy. If the current pace of borrowing continues, Nigeria risks entering a debt trap, where new loans are needed merely to service existing obligations, leaving little room for economic development.

As the country navigates these fiscal challenges, the government faces mounting pressure to manage its debt sustainably and ensure that borrowed funds are used to promote long-term growth rather than merely covering recurrent expenses. The increasing debt load could also put additional strain on the exchange rate, as more Naira is injected into the economy to fund borrowing.

In conclusion, while the government’s borrowing practices may offer short-term relief, there are growing concerns over the long-term impact on inflation, private sector lending, and the overall fiscal health of the country. With more than N9 trillion in borrowings planned for 2025, Nigeria’s fiscal strategy will come under intense scrutiny in the coming months.