In the first year of President Bola Tinubu’s administration, the Federal Government of Nigeria borrowed N20.1 trillion from domestic investors, marking a 117% year-on-year increase from the previous year. This substantial rise in borrowing has sparked concerns about its potential impact on the economy, including additional pressure on inflation, increased debt servicing costs, and higher borrowing costs for businesses.
Analysts warn that the surge in government borrowing could exacerbate the country’s already high inflation rates, potentially leading to further interest rate hikes by the Central Bank of Nigeria (CBN), thereby increasing the cost of borrowing for both businesses and individuals.
The Federal Government raises funds from domestic investors through the issuance of various instruments, including FGN Bonds, FGN Savings Bonds, Sukuk Bonds, and Nigeria Treasury Bills (NTBs), the latter being issued by the CBN on behalf of the government. Data from the Debt Management Office (DMO) and CBN reveal that from June 2023 to May 2024, the government borrowed N20.09 trillion, compared to N9.275 trillion in the previous 12 months. Notably, NTBs accounted for the majority (66%) of this domestic borrowing, with a 188% increase to N13.235 trillion over the period.
Further analysis shows that borrowing through monthly FGN Bond auctions, which made up 32.8% of the total domestic borrowing, rose by 42% to N6.476 trillion. Sukuk Bonds saw a 169% increase to N350 billion, representing 1.7% of the total borrowing. FGN Savings Bonds also experienced a significant rise, with a 116% increase to N29.17 billion, making up 1.5% of the domestic borrowing.
Source: VANGUARD