Rebuilding Public Trust in Government Borrowing: The Case for Scaling Up Sukuk Financing in Nigeria
The recent request by President Bola Tinubu to the National Assembly for approval to raise $20.52 billion and €1.045 billion in fresh external loans has once again brought Nigeria’s growing public debt burden into sharp focus. Although the President has justified the proposed borrowing on the grounds of the country’s enormous infrastructure deficit and the […]
President Bola Tinubu recently sought approval from Nigeria's National Assembly to raise a substantial $20.52 billion and €1.045 billion in fresh external loans. This proposal has reignited discussions surrounding Nigeria's burgeoning public debt burden, which has grown significantly over the past decade. While the President argues that the borrowing is necessary to tackle the country's substantial infrastructure deficit and finance critical projects, many Nigerians remain skeptical.
They question whether these borrowed funds will be efficiently utilized, transparently managed, and ultimately translate into tangible developmental outcomes. The fundamental concern is whether the borrowed money will genuinely contribute to the nation's progress.
As of June 30, 2026, Nigeria's total public debt reached ₦166.79 trillion, with external debt comprising $54.52 billion or 45.09 per cent of the overall debt. This represents a dramatic increase from the ₦11.24 trillion debt recorded in December 2014. The surge in debt, partly due to naira devaluation and the securitization of accumulated obligations, raises questions about the country's ability to sustain its debt and the developmental returns on borrowed resources.
Focusing solely on the debt-to-GDP ratio may not fully capture Nigeria's debt challenge. Rather, the pressing concern is the government's capacity to generate sufficient revenue to service its obligations. In recent years, debt servicing has consumed over 70 per cent of government revenues, leaving less fiscal flexibility for essential public services like infrastructure, education, and healthcare.
Furthermore, the composition of Nigeria's debt portfolio is highly skewed towards conventional government securities. Domestic debt instruments account for 74.53 per cent of the total outstanding, with only 1.37 per cent in the form of FGN Sukuk and a mere 0.05 per cent in FGN Green Bonds. This dominance of conventional bonds, particularly those not linked to specific infrastructure projects, contrasts sharply with the minuscule presence of instruments specifically designed to finance identifiable developmental investments.
To address these concerns, there is a strong case for increasing the use of Sukuk in Nigeria's borrowing strategy. Sukuk, or Islamic bonds, provide a unique opportunity to link the raising of funds to clearly defined assets and development projects. This approach enhances transparency and allows for a more effective monitoring of the proceeds' application.
By prioritizing Sukuk, Nigeria can not only tackle its substantial infrastructure deficit but also rebuild public confidence in government borrowing. While Nigeria has previously introduced a Sovereign Sukuk program in 2017, subsequent issuances have primarily targeted federal road construction and rehabilitation. This indicates the potential of Sukuk to mobilize domestic financial resources for tangible infrastructure projects.
However, the challenge lies in rebalancing the debt portfolio to include more Sukuk, particularly those that directly fund identifiable development projects, thereby creating a financing framework where the purpose of borrowing is more transparent and the application of proceeds can be more effectively monitored.
Written by urgent.news from Daily Trust's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
