$21.7bn external borrowing plan is investment, not debt – Oyedele

By Johnbosco Agbakwuru

The Federal Government has put a strong defence to its proposed $21.7 billion external borrowing plan, describing it as a long-term investment in infrastructure, human capital and economic growth rather than an additional debt burden.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, made the clarification while briefing State House correspondents at the end of the Federal Executive Council, FEC meeting, presided over by President Bola Tinubu at the Council Chamber, presidential villa, Abuja.

He said the five-year project financing plan was designed to create productive assets whose long-term economic value would outweigh the cost of borrowing.

Presenting the highlights of the Federal Executive Council (FEC) meeting, Oyedele said the plan covered critical investments in transportation, defence and security, health, agriculture, energy, digital infrastructure, small businesses, social protection, environmental protection and education.

He disclosed that about $10.6 billion had been earmarked for transportation infrastructure, including major highway projects such as the Sokoto-Badagry and Lagos-Calabar coastal highways, as well as the Kano-Kaduna Metro Rail project.

The minister, however, clarified that the proposal was a financing plan submitted to the National Assembly and did not mean the entire amount had already been borrowed or would necessarily be drawn down in full.

According to him, the Federal Government was acting as the coordinating authority for external financing covering federal, state and other public-sector projects.

He said approximately $4.8 billion of the proposed financing was allocated to projects involving state governments, the Federal Capital Territory and other subnational entities, agencies and development finance institutions.

Oyedele said about $7.9 billion would come from multilateral and bilateral development partners, including $5 billion from the World Bank at concessional rates averaging 2.1 per cent.

He added that the indicative average interest rate on the commercial component was 7.8 per cent, which he said was below the rate on Nigeria’s November 2025 Eurobond.

The minister argued that borrowing could strengthen the country’s balance sheet if the resulting investments generated assets and economic benefits exceeding their financing costs.

Using the Dangote Refinery as an illustration, he said large-scale projects often required external financing to be completed within a reasonable period, adding that Nigeria needed to adopt a similar approach to transformative infrastructure.

On the state of the economy, Oyedele said Nigeria’s economic indicators had improved since President Bola Tinubu introduced major reforms in May 2023, although he acknowledged that significant challenges remained.

He recalled that inflation stood at 22.41 per cent when the reforms began, while the country’s net foreign reserves were estimated at $859 million, insufficient to cover a month of imports.

He also cited multiple foreign exchange rates, a premium of more than 60 per cent between official and parallel-market rates, and debt-service costs consuming about 97 per cent of government revenue as evidence of the pressures facing the economy.

According to him, the government had been forced to address structural weaknesses that threatened economic stability, arguing that failure to implement the reforms could have resulted in runaway inflation and a further collapse of the naira.

Oyedele said economic growth had risen from 2.74 per cent in 2023 to 4.43 per cent in the second quarter of 2026, while inflation declined to 14.63 per cent in September from 20.98 per cent a year earlier.

He also reported that foreign reserves had risen to more than $55 billion, with net reserves exceeding $45 billion, compared with less than $1 billion three years earlier.

The minister said the naira had stabilised within the range of N1,330 to N1,350 to the dollar, adding that the International Monetary Fund had estimated that the currency was undervalued by about 25 per cent.

He further stated that the tax-to-GDP ratio had risen from approximately seven per cent in 2023 to 12.5 per cent by the end of 2025, while the debt-service-to-revenue ratio had fallen from about 97 per cent to below 60 per cent.

Federation Account revenue, he added, increased by 44 per cent between 2024 and 2025, with the government projecting growth of at least 50 per cent in 2026.

Oyedele said international confidence had also improved, citing credit-rating upgrades and positive outlooks from rating agencies, as well as Nigeria’s exit from the Financial Action Task Force’s grey list and the European Union’s list of high-risk jurisdictions.

The minister said the government’s economic programme had also provided direct support to households, students and businesses.

He disclosed that more than N372.6 billion had been disbursed through the Nigerian Education Loan Fund (NELFUND) to over 1.5 million students, while more than 10 million households had received cash transfers worth over N600 billion.

The government, he said, was targeting at least 15 million beneficiary households under the cash-transfer programme.

Oyedele added that more than 800,000 micro, small and medium-sized enterprises had accessed subsidised single-digit-interest loans, largely through the Bank of Industry.

Under the tax reforms, he said, low-income earners making up to N100,000 monthly had been exempted from personal income tax, while small businesses with annual turnover of not more than N100 million had been exempted from corporate income tax, value-added tax collection and withholding-tax obligations, subject to the applicable provisions of the law.

He also cited the expansion of the Nigerian capital market, whose value he said had risen from about N30 trillion to more than N160 trillion in three years, as evidence of growing investment activity and wealth creation.

Despite the improvements, Oyedele said FEC recognised the need to address the high cost of living, particularly food prices, and agreed to intensify efforts to improve living standards.

He said the council adopted a target of reducing inflation to single digits by the end of 2027 or earlier, while prioritising food-price stability, critical infrastructure, human-capital development and job creation.

The council also endorsed the National Economic Council’s 90-day action plan aimed at easing the cost of living through coordinated action by federal, state and local governments.

On other FEC decisions, Oyedele disclosed that the council considered 10 memoranda presented by his ministry, including financing arrangements for electricity transmission, railway infrastructure, road development and customs modernisation.

He said a €155.9 million credit facility arranged through Deutsche Bank and other lenders would support five substations and associated transmission infrastructure under Phase One of the Presidential Power Initiative.

The intervention, he said, was intended to improve electricity reliability for households and businesses while helping to reduce energy costs.

The council also considered a $970 million syndicated term loan arranged by Standard Chartered and the Africa Finance Corporation for rolling stock on the Kano-Maradi railway line.

According to the minister, the railway investment was expected to reduce freight costs, facilitate regional trade and improve logistics along the northern economic corridor.

Another €76.8 million facility from the ECOWAS Bank for Investment and Development was approved for Bauchi State’s transport infrastructure development programme, including rural and urban roads and routes linking farms to markets.

Oyedele said FEC also approved investment in non-intrusive inspection scanners, alongside technical support, repairs and maintenance for the Nigeria Customs Service, to accelerate cargo clearance, combat smuggling and improve the detection of prohibited goods and dangerous weapons.

He said the government remained committed to fiscal discipline and investment in infrastructure and social development, arguing that the success of the borrowing programme would ultimately depend on the value delivered by the projects and their benefits to Nigerians.

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