Economy
Problem with Nigeria’s debt, not size but huge cost of servicing—LCCI
Lagos Chamber of Commerce and Industry has said that problem with Nigeria’s debt is not the size but the cost. Reacting to the down grade of Nigeria’s Sovereign Risk Profile Dr Chinyere Almona Director General Lagos Chamber of Commerce and Industry said “the Lagos Chamber is gravely concerned about the recent downgrades of Nigeria’s Sovereign Risk profile by three leading global default risk rating agencies. Fitch downgraded Nigeria’s long-term foreign currency debt Issuer Default Rating (IDR) from ‘B’ to ‘B-, few notches above a junk status, following Moody’s lead in downgrading Nigeria’s risk outlook, and Standard and Poor’s placement of Nigeria’s Eurobonds on its watchlist. The rating agencies all pinned Nigeria’s deteriorating risk profile down to weakening external and government finances, especially the facts that declining government revenues are now falling short of rising interest payments on government debt; inadequate availability of foreign exchange, and heightened exchange rate uncertainty, all in the face of strong global oil prices.
“Rather than continue as if nothing has happened, the Government of Nigeria needs to explicitly address the issues flagged by multiple global risk rating agencies and announce measures to de-escalate the risks arising from them. A commitment by the Government to immediately expedite the attainment of the following positive outcomes will allay the legitimate concerns expressed by the three global rating agencies; reduce revenue leakages; sustain ongoing conversations and efforts to curb oil theft, remove subsidies, reduce waivers, and unify multiple exchange rates to reduce revenue leakages. Government should complement ongoing efforts to generate more tax revenue through annual Finance Acts with parallel efforts to generate non tax revenue from fees, rent, and other income from government assets through annual Investment Acts. Countries like UAE and Saudi Arabia rely more on fees than taxes and seem to be better off when compared with countries that rely more on taxes than fees like Nigeria.
“Nigeria’s issuance of two more 5G technology and telecoms operations licenses by the NCC and the oil licenses granted by NNPC for oil blocks positive steps in this direction that we encourage to replicate across all infrastructure sectors. Nigeria needs to increase the quality of its debt issues to bring down the issue rates on new debt issues. The main problem with Nigeria’s debt is not the size but the cost. Malaysia’s debt stock of $225 billion is more than twice Nigeria’s debt of $100 billion but the average interest rate on Malaysia’s debt is less than half of the average of 12 percent that Nigeria spends on lower debt stock. Saudi Arabia also owes more than US$260 billion but enjoys average interest rate that is also less than half of Nigeria’s. The difference between Nigeria and these countries is that they issue higher quality debt that attracts investment grade ratings from the same global risk rating agencies that are currently downgrading Nigeria’s risk profile towards a junk issuer status. Nigeria does not have any investment grade debt in its portfolio, which are mostly promissory notes or mere IOUs against declining revenues. These are known to attract the highest known issue rates at home and abroad. The fact that a Nigerian company recently issued a bond-rated investment grade by Fitch is evidence that the Nigerian government can also make efforts to issue investment grade bonds. Investment grade bonds must however be asset-based rather than revenue-based, as the recent issue cited above shows. Nigeria has far more choice assets it can issue bonds against than the company in question.
“The enduring solution to the inadequate availability of foreign exchange and heightened exchange rate uncertainty is to issue more cross-border equity. Nigeria’s strongest fiscal and financial point today is that it has not issued any equity at home and abroad in a long time, preferring to issue on debt in terms of treasury bills, FGN Bonds, and Eurobonds. With a lengthy list of prized corporate, real estate, and infrastructure assets in its kitty, the world will only be too glad to invest surplus global liquidity in Nigeria’s assets, if Nigeria chooses to offer the opportunity, like China, India, Brazil, Saudi Arabia, Malaysia, and Egypt are gainfully doing. The choice is ours. Looking at the Government’s revenue and expenditure framework for 2023, the Chamber is also concerned about the risks of falling into deeper debt crises. The N20.5 trillion budget proposed to the National Assembly by the President for 2023 includes a deficit of a whopping N10.78 trillion, which is more than 50% of the entire budget. The President has proposed that more borrowings will fund N10.5 trillion out of these deficits. It will be insensitive to go ahead with the proposed borrowing after Nigeria’s debt sustainability has been red flagged by multiple global default risk rating agencies.
“In response to the warnings from the global risk rating agencies about Nigeria’s debt sustainability, the National Assembly should revise the financing thrusts of the budget proposals to emphasize equity financing and deemphasise debt financing. Issuing equity at home and abroad (FDI) by inviting foreign investors to invest in state-owned companies, government real estate portfolio, and infrastructure sectors, the way we invited them to invest in LNG, telecoms, and pension sector, would be a better and more sustainable way of funding the deficits. With every sense of responsibility and precaution, we urge the Government to be more sensitive to the crisis indicators that are being pointed to by critical stakeholders and announce timely commitments to take required actions”.
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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