President Bola Tinubu has written to the National Assembly again, this time seeking approval for a $2.3 billion foreign loan.
This is in addition to plans to issue a $500 million sovereign Sukuk, marking Nigeria’s debut in the international Islamic finance market.
The request, made in a letter read on the House floor by Speaker Tajudeen Abbas on Tuesday, complies with Sections 21(1) and 27(1) of the Debt Management Office Establishment Act, 2003.
The borrowing strategy seeks legislative approval for external financing to carry out the 2025 Appropriation Act, refinance maturing Eurobonds, and diversify Nigeria’s debt instruments to include Islamic financial products.
Tinubu mentioned that “the 2025 fiscal framework anticipates $9.27bn in new borrowings to address the budget deficit, of which $1.84bn is earmarked for external sources at an assumed exchange rate of N1,500 to the dollar.”
He explained that the external borrowing would be obtained using a variety of vehicles, such as Eurobonds, syndicated loans, bridge financing, or direct loans from multilateral organizations, in order to reduce costs and effectively manage risks.
A crucial component of the strategy is the refinancing of Nigeria’s $1.118 billion Eurobond, which was issued in 2018 at a coupon rate of 7.625% and matures in November 2025.
“This is a standard practice in debt capital markets,” the president wrote. “Refinancing through Eurobonds or syndicated loans will guarantee debt sustainability and boost investor confidence.”
Tinubu insisted that refinancing maturing liabilities was part of routine debt management and critical to maintaining Nigeria’s fiscal integrity.
The president’s letter also revealed plans to issue a $500 million sovereign Sukuk on a global scale, with the goal of strengthening Nigeria’s position in the Islamic financial sector.
The effort builds on the success of domestic Sukuk issuances, which raised N1.39 trillion since 2017 to fund key infrastructure projects like significant road building.
According to Tinubu, foreign Sukuk will assist Nigeria in closing the infrastructure funding gap while expanding its investor base.
The government is also considering a credit enhancement guarantee from the Islamic Corporation for the Insurance of Investment and Export Credit, a member of the Islamic Development Bank Group, to boost its offering.
“If the ICIEC credit guarantee is utilized, 25% of the proceeds will be used to repay relatively expensive debt obligations, while the balance will finance pre-identified infrastructure projects,” the president said.
He told legislators that the Federal Ministry of Finance and the Debt Management Office will hire competent transaction consultants to get the best pricing and terms despite the uncertain global market conditions.
Tinubu also expressed confidence in Nigeria’s reputation as a reliable and credible issuer in international capital markets, pointing out that the proposed transactions would strengthen investor trust and ensure responsible budgetary management.
The new borrowing request comes as Nigeria faces the twin challenges of funding a large budget deficit and managing a complex debt portfolio.
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As Africa’s largest economy, the Federal Government continues to strike a balance between infrastructure-led growth and debt sustainability.
The 2025 budget proposes $9.27 billion in new loans, with $1.84 billion coming from outside sources.
Analysts believe the government’s growing reliance on a combination of domestic and international funding is a pragmatic response to rising inflation, currency instability, and high global interest rates.
Nigeria’s success in domestic Sukuk issuance has demonstrated Islamic finance’s ability to fund tangible development projects.
Expanding this tactic to global markets could improve the country’s credit quality and reduce its reliance on traditional borrowing methods.
The proposed use of the ICIEC guarantee is also projected to reduce borrowing costs by raising Nigeria’s credit rating, making the new Sukuk more appealing to global investors.
According to analysts, allocating a quarter of the earnings to retire expensive loans demonstrates a prudent and deliberate approach to managing the nation’s debt structure.
