President Bola Tinubu's recent request to the National Assembly for approval to raise $20.52 billion and €1.045 billion in fresh external loans has brought Nigeria's growing public debt burden into sharp focus. The proposed borrowing aims to finance critical projects across various sectors of the economy, but it has generated considerable concern among Nigerians. These concerns stem from Nigeria's debt accumulation over the past decade, the limited visible impact of borrowing on infrastructure development, and the growing proportion of government revenue devoted to servicing existing debt.
Nigeria's public debt statistics reveal a significant increase in the country's debt burden. As of June 30, 2026, the total public debt stood at ₦166.79 trillion, comprising domestic debt of ₦91.59 trillion and external debt of ₦75.20 trillion, equivalent to $54.52 billion. This represents a substantial increase from the ₦11.24 trillion public debt stock recorded in December 2014. The scale of the expansion over a relatively short period raises legitimate questions about debt sustainability and the developmental returns on borrowed resources.
The composition of Nigeria's debt portfolio also raises important questions about the extent to which borrowing has been linked to productive investment. The Federal Government's domestic debt stock outstanding by instruments as of June 30, 2026, stood at ₦86.99 trillion. Of this amount, discretionary FGN Bonds accounted for ₦64.84 trillion, representing 74.53 per cent of the total. In contrast, FGN Sukuk outstanding amounted to only ₦1.19 trillion, representing 1.37 per cent, while FGN Green Bonds accounted for a mere ₦47.36 billion.
The external debt portfolio presents a related challenge, with Eurobonds accounting for a significant proportion of Nigeria's external debt stock. Eurobonds provide access to international capital markets but are generally not structured around specific infrastructure assets or projects. Nigeria faces substantial future Eurobond repayment obligations, including a $1.5 billion bullet repayment falling due in November 2027.
To address these challenges, greater consideration should be given to Sukuk as an alternative and complementary instrument for financing Nigeria's infrastructure requirements. Properly structured Sukuk provide an opportunity to link the raising of funds to clearly identified assets and development projects, creating a financing framework with transparent borrowing purposes and effective monitoring of proceeds.
Nigeria has experience with Sukuk financing, having introduced its Sovereign Sukuk programme in 2017. The programme has demonstrated that Sukuk can mobilize substantial domestic financial resources for identifiable infrastructure projects, such as the construction and rehabilitation of federal roads across the six geopolitical zones and the Federal Capital Territory.
Scaling up Sukuk financing could help rebuild public trust in government borrowing and provide a more transparent and effective way to finance infrastructure projects. With outstanding Federal Government Sukuk accounting for only about 1.37 per cent of the domestic debt portfolio, its current scale remains too small to make a transformational impact on the country's infrastructure deficit.
Key points
- Nigeria's debt service has consumed an exceptionally high proportion of government revenue, averaging in excess of 70 per cent over the period under consideration.
- The Federal Government's Sovereign Sukuk programme has demonstrated that Sukuk can mobilize substantial domestic financial resources for identifiable infrastructure projects.
- Scaling up Sukuk financing could help rebalance Nigeria's debt portfolio towards financing instruments that establish a clearer connection between borrowed funds and identifiable development projects.
