Experts caution against Nigeria’s $2.8bn global borrowing drive

Tuesday, October 14, 2025 - Experts have warned the Federal Government as Nigeria prepares to make a return to the international capital markets with plans to raise up to $2.8 billion through Eurobonds and global Sukuk issuances before the end of 2025.

They warned that while global conditions have improved, Nigeria’s fiscal and credit fundamentals remain fragile, and the success of any new issuance will depend on investor confidence in the country’s ongoing macroeconomic reforms.

The move marks another major borrowing effort by Africa’s largest economy as it seeks to fund budget deficits, stabilise its finances, and maintain liquidity amid growing domestic and external debt concerns.

According to government sources and recent reports, the Federal Government of Nigeria (FGN) intends to issue $2.3 billion in Eurobonds and $500 million in global Sukuk bonds in the fourth quarter of 2025 (Q4’25).

The Debt Management Office (DMO) is expected to coordinate the issuance, which will likely be spread across multiple maturities to appeal to a diverse investor base.

The development comes less than a year after Nigeria’s last Eurobond issuance in December 2024, when it successfully raised $2.2 billion in an oversubscribed offer that demonstrated investor confidence in the country’s reform trajectory and improving foreign exchange management under the Central Bank of Nigeria (CBN).

However, the renewed borrowing plan is stirring debate among analysts, with growing concerns about the implications for Nigeria’s debt sustainability, fiscal balance, and long-term economic health.

Nigeria’s timing for the planned Eurobond re-entry coincides with a more favourable global financial environment. In September 2025, the U.S.

Federal Reserve implemented a 25-basis points rate cut, its first in nearly two years, easing global borrowing conditions and improving liquidity in emerging market debt.

This shift has reignited investor appetite for higher-yielding assets, particularly from frontier and emerging markets like Nigeria.

For policymakers in Abuja, this presents a narrow but significant opportunity to secure funds at relatively lower costs compared to the tightening conditions that prevailed through 2023 and early 2024.

“The rate cut by the Fed has made international capital more accessible,” said Dr. Abiola Raji, a fixed income strategist at Afrinvest.

“Nigeria wants to take advantage of this window before rates begin to rise again or before market sentiment shifts.”

Nigeria’s decision to combine Eurobond and Sukuk offerings reflects a deliberate attempt to diversify funding sources and investor profiles. While Eurobonds typically attract Western institutional investors, Sukuk instruments—structured in line with Islamic finance principles— appeal to investors in the Middle East and parts of Asia.

The $500 million Sukuk issuance will be Nigeria’s first global Islamic bond, expanding on its success in the domestic Sukuk market, which has funded over 44 major road projects across the country since its debut in 2017.

According to a top DMO official, the Sukuk bond is part of efforts to “tap into new pools of capital and attract ethical investors seeking non-interest financial instruments.”

The official added that the government plans to deploy proceeds primarily to infrastructure and energy projects that can yield long-term economic returns.

However, economists caution that the ultimate impact of the borrowing depends on how efficiently the funds are used.

“Borrowing itself is not inherently bad,” said Prof. Adeola Adeniran, an economist at Pan-Atlantic University. “What matters is whether the money is invested in projects that can generate growth and revenue to repay the loans. If borrowed funds are channeled into consumption or administrative costs, the debt burden will simply multiply.”

The borrowing plan comes at a time when Nigeria’s total public debt stock has climbed to N152.4 trillion (about $99 billion) as of June 2025, according to the latest DMO figures.

This represents a 13% year-on-year increase and underscores the government’s growing fiscal reliance on debt to fund its operations.

Of this total, N71.9 trillion (47%) is external debt, while N80.6 trillion (53%) is domestic. Nigeria’s debt-to-GDP ratio currently stands at around 42%, well below the new legal ceiling of 60%, but analysts say the more pressing concern is the debt service-to-revenue ratio, which exceeded 80% in 2024.

This means that for every N100 earned by the Federal Government, over N80 is used to pay interest and principal on existing debts—a trend that severely limits fiscal flexibility.

“The issue is not how much Nigeria owes, but how much it earns,” explained Dr. Johnson Chukwu, CEO of Cowry Asset Management. “With weak non-oil revenue and volatile oil earnings, the debt servicing burden is unsustainable in the medium term.

The Federal Government has defended its borrowing plans, arguing that it remains necessary to support capital expenditure and drive economic recovery. It has also emphasized that the proceeds from the planned Eurobond and Sukuk issuances will be used primarily for infrastructure, energy, and fiscal deficit financing, not recurrent spending.

President Bola Tinubu’s administration has rolled out several measures aimed at improving revenue generation, including rationalizing tax exemptions, expanding the Value Added Tax (VAT) base, and strengthening the Federal Inland Revenue Service (FIRS) through digital compliance systems.

Additionally, oil production has gradually recovered to around 1.5 million barrels per day, supported by reduced theft and improved pipeline security.

Still, fiscal experts insist that without aggressive non-oil revenue mobilization, Nigeria will continue to depend on borrowing to fill widening budget gaps.

“The fundamental issue is revenue inadequacy,” said Kemi Awodele, head of research at a Lagos investment firm. “Until Nigeria raises its revenue-to-GDP ratio to at least 15 percent, borrowing will remain the default solution to every fiscal problem.”

Market analysts believe Nigeria’s ability to successfully issue fresh Eurobonds and Sukuk will hinge on how global investors perceive the country’s reform momentum and macroeconomic stability.

The government’s recent efforts to unify the exchange rate, strengthen monetary discipline, and improve FX liquidity have been welcomed by international observers, but challenges remain.