Analysts have predicted that the Federal Government’s external borrowing is likely to rise
significantly in the second half of 2025, with an estimated N4.90 trillion expected to be
sourced from international lenders.
This projection was revealed in CardinalStone’s mid-year economic outlook report titled
‘Charting The Sustainability Path.’
In the first half of 2025, the government largely relied on domestic sources to finance its
budget deficit, raising approximately N3 trillion through Treasury Bills and Bonds. However,
with the total estimated deficit for the year pegged at around N13.08 trillion, a net issuance
of about N10.08 trillion may still be required in the second half.
To meet this target, the Federal Government is also seeking approval from the National
Assembly for foreign loans totaling $21 billion, €2.2 billion, and ¥15 billion under its rolling
borrowing plan.
Looking ahead, analysts expect a marked increase in external borrowing in H2 2025.
Specifically, the government plans to raise $1.2 billion through the Debt Management Office and an additional $2 billion at concessionary rates from multilateral sources, signaling a strategic shift toward foreign financing in the latter half of the year.
Based on current figures, a total of N4.90 trillion calculated using the official exchange rate
of $1,530.00/$ as of June 1, 2025 is expected to be sourced externally. The remaining
N5.19 trillion needed to finance the deficit will likely be raised from the domestic market after accounting for rollover obligations.
Analysts also believe that a portion of the external borrowings may be allocated to settle the upcoming $1.12 billion Eurobond maturity due in November, as well as cumulative coupon payments estimated at around $1.38 billion.
Researchers have identified a potential upside to Nigeria’s fiscal outlook in the form of
increased remittances from the Nigerian National Petroleum Company Limited (NNPCL) to
the Federation Account. This improvement hinges on the Federal Government’s ability to
settle its outstanding debt of N1.70 trillion to the company. Currently, NNPCL remits only
about 50 percent of its earnings, largely due to unresolved claims related to fuel subsidy
payments.
Despite ongoing geopolitical tensions, analysts have maintained a conservative oil price
estimate of $65 per barrel, alongside a revised oil production forecast of 1.68 million barrels per day.
Meanwhile, analysts at Afrinvest, during their mid-year economic webinar, highlighted that
government borrowing in the first half of 2025 was largely short-term. They noted that
borrowing still falls short of covering the Federal Government’s proposed N13.1 trillion
deficit, with Afrinvest projecting the actual funding need could rise to as much as N17.2
trillion.
This significant gap may force the Debt Management Office (DMO) to increase its issuance
of medium- to long-term instruments or expand its reliance on external borrowing in the
second half of the year. Afrinvest also observed that over 75 percent of domestic borrowing was done through Nigerian Treasury Bills (NTBs), signaling a preference for short-term liquidity. However, this approach may heighten rollover risks and create a mismatch in debt maturity.
The firm warned that investors should brace for increased bond supply in the second half of 2025, with potential upward pressure on yields especially if foreign exchange inflows weaken or revenue projections fall short.
