…Cordros Research takes a big-picture look at the Federal Government’s Fiscal Borrowings and offers explanations to better understand the implications.
TUE JUNE 10 2025-theGBJournal| Cordros Research, in new report, highlights the implications of the Federal Government’s 2024–2026 external borrowing plan which totals US$24.10 billion, comprising US$21.5 billion, EUR2.20 billion, and JPY15.00 billion, and projected that overall, fiscal borrowings will stay high in the Medium Term.
The Minister of Finance had said when the plan was unveiled on Moay 27 2025, that the plan, a statutory component of the Medium-Term Expenditure Framework (MTEF), covers projects at both federal and sub-national levels.
The external loan projection also includes a significant share of concessional financing from multilateral and bilateral partners, which can be drawn down within a 5–6 year period.
The 2023 revised 2024–2026 MTEF projected external borrowings of N9.17 trillion (US$13.29 billion) for the Federal Government (FG), comprising N4.15 trillion (US$7.24 billion) in Eurobond issuances and N5.02 trillion (US$6.05 billion) in project-tied loans.
According to Cordros Research, these estimates may have been further revised to reflect the depreciation of the naira and broader macroeconomic adjustments.
”However, the figures suggest that the FG likely accounts for the largest share of the newly submitted borrowing request.” Cordros said.
In any case, assuming the FG’s borrowing target remains unchanged at US$13.29 billion, the balance of US$10.81 billion likely represents external borrowing needs at the sub-national level.
Actual Borrowing will closely reflect annual budget plans
Despite the broader MTEF targets, Cordros believes the FG’s actual borrowing will be more closely aligned with its approved annual budget.
The finance minister has reiterated that the 2025 external borrowing plans will reflect the budgetary provisions.
For 2025, the government intends to raise N1.84 trillion (US$1.20 billion) via Eurobond issuance and secure an additional N3.80 trillion (US$2.53 billion) in project-tied loans.
Notably, the World Bank approved US$1.08 billion in concessional financing in March 2025, which likely forms part of the project-related loan budget.
However, downside risks remain. Global macroeconomic uncertainty and cautious investor sentiment have driven borrowing costs higher, posing challenges to sovereign bond issuances.
Moreover, the realisation of project-linked loans will depend on the timely completion of appraisals and adherence to disbursement conditions.
Historically, Nigeria has struggled to execute capital projects effectively, with delays, weak procurement systems, and difficulties in meeting multilateral requirements often impeding performance.
Domestic borrowing to remain the mainstay
Government borrowings in the debt market is expected to remain elevated, particularly as budgeted revenues are likely to fall short due to weaker oil receipts stemming from both lower-than-budgeted crude oil prices (Jan–Apr average: US$67.72/barrel vs. budget benchmark of US$75.00/barrel) and underperformance in production volumes (Jan–Apr average: 1.68 mb/d vs. budget target of 2.06 mb/d).
With domestic borrowings generally carrying lower risk, including reduced currency exposure and more manageable debt servicing terms, Cordros anticipates that the government will continue to rely heavily on the domestic market to meet its financing needs.
Given the revenue forecast of N28.77 trillion (compared to the budgeted N41.81 trillion) and a projected budget implementation rate of 82.3% (N45.24 trillion vs Budget: N54.97 trillion), Cordros forecast the fiscal deficit to settle at N16.47 trillion in 2025FY – including project-tied loans of N3.80 trillion.
Excluding these loans and privatization proceeds of N312.33 billion, we estimate net borrowing requirements at approximately N12.36 trillion.
As of now, the government has already mobilized N2.99 trillion through domestic instruments such as Treasury bills and bonds.
Should the FG succeed in issuing up to US$2.00 billion in Eurobonds, the balance of c. N6.37 trillion will likely be sourced from the domestic market in the months ahead.
”This points to continued robust borrowing activity, potentially supplemented by domestic dollar-denominated bonds,” Cordros said.
The government’s ongoing pivot away from deficit financing through the Central Bank of Nigeria (CBN) also underscores its growing reliance on the broader debt market.
Fixed income yields likely to pare but will remain elevated
Despite robust borrowing forecasts, which are expected to sustain an elevated supply of government securities, Cordros also expect yields to moderate in H2-25.
”This is primarily due to a potential shift to monetary policy easing by the Monetary Policy Committee (MPC) in the later part of the year.”
Specifically, they believe that if inflation continues to moderate and global headwinds ease further, the MPC will likely initiate its first interest rate cut at its November policy meeting, reducing the MPR by 100bps to 26.50%.
This is expected to cause yields to moderate further towards the end of the year. Nonetheless, still high borrowings and a cautious pace of monetary easing, underpinned by the existing global uncertainty, will keep yields relatively high by historical standards.
On average, Cordros estimate yields on Treasury bills and Bonds to ease to 20.5% (current: 23.0%; 3-year average: 11.14%) and 17.5% (current: 18.8%; 3-year average: 14.80%), respectively, by year-end.
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