Bola Tinubu external borrowing, $2.3 billion new loan, sovereign sukuk, Nigeria debt refinancing, Nigeria budget support, Nigeria sovereign debt, parliamentary approval new borrowing Nigeria

In a bold move to bolster Nigeria’s fiscal space, President Bola Tinubu has formally requested that the National Assembly approve $2.3 billion in new external borrowing and the issuance of a $500 million sovereign sukuk. This proposal is part of a broader strategy to refinance maturing foreign obligations and provide budget support for the 2025 financial year.

News agencies report that the request was made in a letter read to lawmakers. (Reuters) The government frames this as necessary to manage its debt obligations while maintaining macroeconomic stability. (Reuters)

The Proposal in Detail

Here are the key elements:

Officials have said the government will consider various instruments: Eurobonds, syndicated loans, bridge financing, or direct bank borrowing. (Reuters) They view sukuk, green bonds, and diaspora bonds as potentially lower-cost alternatives compared to standard Eurobonds. (Reuters)

Why This Move Matters

Debt Management & Maturities

Nigeria has several obligations coming due, especially foreign-denominated bonds (Eurobonds). The government needs to refinance or roll over these maturities. The new borrowing and sukuk issuance aim to help mitigate rollover risk.

Cost of Borrowing

By incorporating sukuk, the government seeks to tap instruments that may have favorable terms compared to conventional bonds, especially if structured well. The diversification into Islamic finance instruments is also a signal to segments of the investor base that prefer Shariah-compliant assets.

Fiscal Support

Nigeria still faces a structural budget deficit due to gaps in revenue collection, subsidy regimes, and the cost of governance. These inflows would provide “breathing room” to cover essential spending without resorting to abrupt austerity.

Market Confidence & Signaling

Requesting parliamentary approval is also a transparency mechanism. It signals to both domestic and international investors that borrowing is being done with oversight. Moreover, it positions Nigeria to re-enter global capital markets (after limited issuance in 2025 so far). (Reuters)

Risks and Challenges

While the strategy has its merits, several risks merit attention:

1. Debt Sustainability
   Additional borrowing increases Nigeria’s debt burden. If terms are not favorable or growth underperforms, the debt-to-GDP ratio could become problematic.

2. Currency & Exchange Rate Risk
   Since most of these are external obligations, depreciation of the naira would raise the home-currency cost of repayment.

3. Investor Appetite & Yield Pressure
   The success of issuing sukuk and new borrowing depends on market receptivity. If yields demanded are too high, financing costs may erode benefits.

4. Approval & Timing Delays
   The request still needs parliamentary approval. Delays or pushback from legislators could stall disbursements or planned refinancing.

5. Structural Reforms vs. Stopgap Measures
   Borrowing must be matched with credible fiscal reforms — improving revenue mobilization, cutting waste, and enhancing growth — otherwise debt becomes a recurring burden.

Broader Context & Supporting Moves

• AfDB Budget Support
  The African Development Bank is reportedly preparing to provide $500 million in budget support to Nigeria in 2025, part of a two-year, $1 billion program. (Reuters)

• Past Borrowing & External Plans
  Earlier in 2025, Nigeria’s Senate approved a broader external borrowing framework exceeding $21 billion, targeting infrastructure and other projects. (Reuters)

• Reform Agenda Under Tinubu
  Since assuming office in May 2023, the Tinubu administration has pursued significant reforms: subsidy removal, unifying exchange rates, tax system changes, and fiscal consolidation. These measures are meant to strengthen investor confidence and support the credibility of borrowing plans. (Reuters)

President Bola Tinubu’s request for parliamentary approval to borrow $2.3 billion and issue a $500 million sovereign sukuk marks a pivotal juncture in Nigeria’s fiscal trajectory. If successful, these moves could help Niger­ia refinance its external debt, support the 2025 budget, and restore confidence in its sovereign bond market. However, success hinges on prudent structuring, legislative support, and strict adherence to fiscal reforms.