Speaking in an interview with Bloomberg Television on the sidelines of the 56th World Economic Forum (WEF) in Davos, Switzerland, Wale Edun, minister of Finance and Coordinating Minister of the Economy, said the government is pivoting toward internal resource generation to finance economic growth and support long-term fiscal sustainability.

“The issue now is to focus on revenue, focus on domestic resource mobilisation. We’re hoping to rely less on borrowing,” Edun stated, underscoring the shift in priorities at a time when global economic volatility persists.

Mr. Edun clarified that while Nigeria retains access to international capital markets, borrowing will remain a strategic option rather than the default source of financing.

He emphasised that boosting internal revenue streams, including enhanced tax collection and reforms, will be central to government policy.

The finance minister highlighted a suite of ongoing reforms aimed at reinforcing fiscal sustainability, including measures to improve tax administration, expand the tax base, and stimulate private sector engagement.

These reforms are part of a broader agenda introduced since 2023 under President Bola Ahmed Tinubu’s administration, which has focused on removing currency restrictions, eliminating costly fuel subsidies, and overhauling Nigeria’s tax framework.

Under the revised tax regime, the government anticipates increasing the tax-to-GDP ratio from roughly 14 percent to approximately 18 percent, a move analysts believe could substantially broaden the country’s fiscal space and reduce reliance on borrowing to finance budget deficits.

Economic indicators suggest early positive signs: the International Monetary Fund (IMF) recently upgraded Nigeria’s 2026 growth forecast to 4.4 percent from an estimated 4.2 percent in 2025, despite persistent pressures from subdued oil prices.

At WEF 2026, Nigeria is showcasing its first official national pavilion, Nigeria House Davos, as part of efforts to engage global investors, highlight policy reforms, and signal confidence in the nation’s fiscal trajectory.

Edun is expected to address investor concerns on issues such as policy consistency, inflation dynamics, foreign exchange stability, and fiscal sustainability.

As the government doubles down on domestic revenue efforts, policymakers and market watchers will be closely monitoring the impact of these reforms on debt dynamics, investor sentiment, and Nigeria’s broader economic recovery in a challenging global landscape.

The president requested the legislature to approve new borrowing plans totaling $21.5 billion, along with €2.19 billion, 15 billion Japanese yen and a €65 million grant, as part of the federal government’s 2025–2026 borrowing framework.

Using the current official exchange rate as of May 27, 2025 at N1650 to $1; the proposed borrowings of $21 billion (N13.65 trillion), €2.19 billion (N4 trillion), 15 billion Japanese Yen (N174 billion) and €65 million (N116 billion) will amount to N17.355 trillion, pushing the country’s debt burden to N162.025 trillion.

The data from the Debt Management Office (DMO) indicated that N56.6 trillion of the country’s current N144.67 trillion debt profile was borrowed by Tinubu’s administration as his predecessor, Muhammadu Buhari, left it at N87.379 trillion.

The president’s fresh loans request was contained in letters read separately at both chambers of the National Assembly by Senate President Godswill Akpabio and the Speaker of the House of Representatives, Tajudeen Abbas.

Why?

The President said the request for the external borrowing was to enable the government fund priority projects across infrastructure, agriculture, health, education, water supply, security and employment generation.

“These projects were selected based on technical and economic evaluations and are geared toward addressing the country’s infrastructure deficit, reducing poverty, creating jobs, and boosting food security,” the president stated.

Citing the impact of subsidy removal and dwindling domestic revenues, Tinubu emphasised the urgency of closing the financial gap through prudent external borrowing, noting that the funds would be targeted at sectors such as power, railways and healthcare.

“I want to emphasise that the projects and programmes included in the Borrowing Plan were selected based on thorough technical and economic evaluations as well as their anticipated contribution to the socio-economic development of the country.

“These initiatives aim to generate employment, promote skill acquisition, foster entrepreneurship, reduce poverty, and enhance food security, all of which will improve the livelihoods of the average Nigerian. The majority of these projects and programmes will be implemented across all 36 states and the Federal Capital Territory.”

He said given the urgent need to stabilise the economy, it was crucial to seek the consideration and approval of the National Assembly for the 2025-2026 External Borrowing Plan as it would enable the government to fulfill its obligations to the Nigerian people through timely disbursement and effective project implementation.

In another letter, Tinubu requested the National Assembly’s approval to raise up to $2 billion through the issuance of foreign currency-denominated financial instruments in Nigeria’s domestic debt market.

“This request is pursuant to the provisions of Section 44 (1) and (2) of the Fiscal Responsibility Act 2007 and Section 1(7) of the Executive Order, which requires National Assembly approval for all new borrowings and appropriation of the proceeds,” the president wrote.

He said the proceeds would be invested in critical sectors of the economy to drive growth, infrastructure, job creation, and foreign exchange earnings.

The strategy, according to him, aims to diversify government funding sources, stabilise the naira and deepen the local financial market.

He said it would allow investors have the opportunity to earn reasonable income on their US Dollar funds, while allowing the government to channel the funds to productive uses in the economy.

However, he acknowledged that the capital raising would increase Nigeria’s public debt stock and debt servicing costs.

N758bn bond to clear pension arrears

In a third request, Tinubu asked the legislature to approve the issuance of bonds worth N757.98 billion in the domestic market to offset outstanding pension liabilities under the Contributory Pension Scheme as of December 31, 2023.

The request, he said, followed the federal government’s non-compliance with several provisions of the Pension Reform Act 2014 over the years due to revenue constraints.

“This bond issuance will enable the federal government to meet its obligations to retirees, restore confidence in the pension system, and improve the welfare of retired public servants,” Tinubu wrote.

(Daily Trust)

This decision follows the CBK’s recent monetary policy changes, including a 75 basis point reduction in its benchmark rate, bringing it to 11.75%—its lowest level since the pandemic. 

The CBK previously issued repeated warnings about the widening gap between the Central Bank Rate (CBR) and commercial lending rates, which had reached a 31-month high in October, making obvious the slow pass-through of monetary policy adjustments to consumers.

Even with these cuts in the CBR, which had not been fully reflected in lending rates, the gap between the CBR and commercial rates continued to increase. 

The average interest rate on loans increased from 16.91% to 17.15% in October, showing the reluctance of Kenyan banks to reduce borrowing costs in response to the central bank’s actions.

On December 6, CBK Governor Kamau Thugge reiterated his call for banks to align their lending rates with the lower CBR, warning that failure to do so could harm the economy. 

He urged the banks to act in the same manner they had when increasing interest rates during periods of rising policy rates, emphasising that it was in their best interests to lower rates. He warned that the failure to reduce rates would have negative consequences for the economy as a whole.

Following the CBK’s pressure, the Kenya Bankers Association (KBA) announced that its 43 member banks would begin reviewing their loan interest rates, to make borrowing more affordable for both individuals and businesses. 

The KBA stated that individual banks had already begun issuing notices to customers regarding the upcoming rate reductions, which will take effect from December 2024. The association also emphasised that these reductions would be gradual, in line with current changes in monetary policy and other economic factors, such as credit risk.

The implementation of the rate cuts incrementally has questions about the full immediate benefits. While the move is welcomed, the KBA has urged the CBK to consider further rate reductions to stimulate economic growth and increase access to credit. 

At the same time, banks have been advised to carefully assess customers’ risk profiles, considering factors such as non-performing loans and the economic challenges that could affect borrowers’ ability to repay their debts.

As part of its initiative to address the issues impeding credit growth, the KBA is engaging with the government to tackle challenges, including the review of risk-based pricing models, resolving delayed payments to businesses, and addressing the backlog of litigation affecting credit expansion.

This latest development follows the CBK’s decision in early December to lower its base lending rate for the third consecutive month, from 12% in October to 11.25%. The CBK attributed this reduction to stable inflation, which stands at 2.8%, driven in part by a decline in the prices of goods and services.

This approval was initiated after the Senate considered the report from its ad hoc committee, which explained how the Nigerian Government had repeatedly borrowed from the CBN in the process exceeding the five percent threshold of the previous year’s revenue as stipulated by the CBN Act.

Buhari had last year asked the Senate to approve his proposal to securitize the loan but the Red Chamber rejected the request, citing a lack of details.

Buhari, while appealing to the Senate to reconsider its stand, said failure to grant the securitization approval will cost the government about N1.8tn in additional interest in 2023.

Presenting the report, the senate leader, Ibrahim Gobir, said: “Part of the Ways and Means monies were given to State Governments as loans to augment budgetary shortfall in their various States.

Mr. President received the majority of the funding requests for an increase in Ways and Means related to the need to finance the budget because of a revenue shortfall. These demands were either made by the Central Bank Governor or the Honorable Minister of Finance, Budget, and National Planning.

Due to income deficits brought on by the COVID-19 epidemic and low oil prices, the Federal Government largely relied on the Ways and Means to finance its budget deficit to keep the nation operating for the benefit of its citizens.

The Federal Government used the funds it received to finance important national initiatives.

The Federal Government was forced to continually borrow money from the CBN to keep the economy from collapsing due to the severe shortfall in government revenue, exceeding the CBN Act of 2007’s 5 percent revenue threshold.

It has finalized preparations to convert CBN loans into tradable securities like treasury bills and bond issuance through the Ministry of Finance, Budget, and National Planning.