The recent request by President Bola Tinubu to the National Assembly for approval to raise $20.52 billion and pound 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 need to finance critical projects across various sectors of the economy, the announcement has understandably generated considerable concern among Nigerians.
These concerns cannot be dismissed as mere opposition to government borrowing. They must be viewed against the background of Nigeria’s debt accumulation over the past decade, the relatively limited visible impact of such borrowing on infrastructure development and the growing proportion of government revenue devoted to servicing existing debt. The fundamental question Nigerians are asking is whether borrowed funds are being efficiently deployed, transparently managed and translated into tangible developmental outcomes.
Nigeria’s public debt statistics provide sufficient grounds for this concern. As at June 30, 2026, the country’s total public debt stood at ?166.79 trillion, comprising domestic debt of ?91.59 trillion, representing 54.91 per cent, and external debt of ?75.20 trillion, equivalent to $54.52 billion, representing 45.09 per cent of the total. This represents a phenomenal increase from the ?11.24 trillion public debt stock recorded in December 2014.
While part of this increase reflects naira devaluation, and the securitization of previously accumulated obligations, the scale of the expansion over a relatively short period raises legitimate questions about debt sustainability and the developmental returns on borrowed resources. More importantly, Nigeria’s debt challenge should not be assessed exclusively through the conventional debt-to-GDP ratio. Although this ratio may appear moderate by international standards, the more immediate fiscal constraint is the country’s capacity to generate sufficient revenue to service its obligations. Debt service has, in recent years, consumed an exceptionally high proportion of government revenue, averaging in excess of 70 per cent over the period under consideration. This leaves progressively less fiscal space for infrastructure, education, healthcare and other essential public services.
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 at 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, including ?22.11 trillion in securitized Ways and Means advances. By comparison, 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, or 0.05 per cent. The overwhelming dominance of conventional government securities, particularly instruments that are not necessarily tied to specific infrastructure projects, contrasts sharply with the relatively insignificant contribution of instruments specifically designed to finance identifiable developmental investments. This is not to suggest that all conventional government bonds are unproductive or that their proceeds cannot finance capital expenditure. Rather, it highlights the need to rebalance the debt portfolio towards financing instruments that establish a clearer connection between borrowed funds and identifiable development projects.
The external debt portfolio presents a related challenge. Of Nigeria’s external debt stock of $54.52 billion, Eurobonds account for a significant proportion, amounting to about $18.55 billion. Although Eurobonds provide access to international capital markets and can help diversify the sources of government financing, they are generally not structured around specific infrastructure assets or projects. Their proceeds may be applied to broad budgetary purposes, depending on the terms of the issuance and the government’s stated financing objectives.
Furthermore, Nigeria faces substantial future Eurobond repayment obligations. The outstanding repayment schedule includes a $1.5 billion bullet repayment falling due in November 2027, followed by significant annual maturities from 2028 through 2034, before repayments resume in 2036 and continue into 2051. These obligations underscore the importance of carefully managing the country’s refinancing and foreign exchange risks. They also reinforce the need to reconsider the composition and structure of future external borrowing rather than continually relying on conventional debt instruments without sufficient attention to the developmental use of their proceeds.
It is against this background that 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, thereby creating a financing framework in which the purpose of borrowing is more transparent and the application of proceeds can be more effectively monitored. This makes Sukuk particularly relevant to a country seeking to address a significant infrastructure deficit while simultaneously rebuilding public confidence in government borrowing.
Nigeria is not starting from scratch in this regard. The Federal Government introduced its Sovereign Sukuk programme in 2017, and successive issuances have been deployed principally towards the construction and rehabilitation of federal roads across the six geopolitical zones and the Federal Capital Territory. The programme has demonstrated that Sukuk can mobilize substantial domestic financial resources for identifiable infrastructure projects. At the subnational level, Osun State issued an ?11.4 billion Sukuk in 2013 to finance the construction of 26 schools, while Lagos State subsequently accessed the Sukuk market to finance road infrastructure. These experiences demonstrate that Sukuk is a financing instrument that can be deployed by both federal and state governments, irrespective of the religious composition of their populations.
The results achieved through the Federal Government’s existing Sukuk programme provide an important basis for scaling up its use. The roads financed through successive issuances demonstrate the practical connection that can be established between public borrowing and physical infrastructure delivery. However, 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.
An important consideration is that Sukuk financing is not limited to the domestic capital market. Both domestic and foreign loans can be sourced through Sukuk structures. The Federal Government could therefore explore international sovereign Sukuk denominated in US dollars, euros or other suitable currencies to mobilize long-term financing from international banks, conventional institutional investors, sovereign wealth funds, pension funds and other global investment institutions. The proposed external borrowing of $20.52 billion and pound 1.045 billion offers an opportunity to examine whether a significant proportion of the financing requirements could be raised through international sovereign Sukuk rather than relying exclusively on conventional external loans.
Different Sukuk structures could be deployed depending on the nature of the projects. Al-Ijarah Sukuk could finance existing or identifiable infrastructure assets through leasing arrangements, while Al-Istisna Sukuk could be used to finance the construction of new infrastructure such as roads, bridges, and power facilities. Al-Musharakah could support commercially viable infrastructure investments involving partnerships between government and private investors. The flexibility of these structures makes it possible to develop a diversified infrastructure financing programme rather than rely on a single financing model. A carefully designed international sovereign Sukuk programme could also attract investors who might otherwise not participate in Nigeria’s conventional Eurobond issuances, thereby broadening the country’s financing options and investor base.
More importantly, the appeal of Sukuk lies in its potential to strengthen transparency and accountability in the utilization of public borrowing. One of the principal reasons for public scepticism towards government borrowing is the perceived disconnect between the amounts borrowed and the infrastructure outcomes delivered. Nigerians are increasingly concerned that governments accumulate enormous debt obligations without providing sufficient information about the projects financed, the amounts disbursed, the physical progress achieved and the economic returns generated. This perception has weakened public confidence in borrowing as an instrument of development. Sukuk can help change this narrative, provided that its project-linked features are supported by effective institutional and contractual safeguards.
Each issuance should identify the projects to be financed, their locations, approved costs, implementing agencies and expected completion periods. The proceeds should be paid into dedicated, ring-fenced accounts and released only against verified project expenditure. Independent technical auditors should certify work completed, while periodic public disclosures should provide information on funds raised, amounts disbursed, outstanding balances and actual physical progress. Where appropriate, special purpose vehicles should be established to administer the transactions and provide clear reporting and governance arrangements.
This approach is also consistent with the spirit and objectives of the Fiscal Responsibility Act 2007. The Act establishes important principles for responsible fiscal management, including the requirement that borrowing be undertaken for capital expenditure and human development, subject to the applicable statutory conditions. Section 44 specifically provides that government borrowing should be applied only to capital expenditure and human development, while the Act also provides for transparency, accountability and prudent management of public resources.
Indeed, Sukuk can provide a practical financing mechanism for advancing these objectives by establishing a more visible connection between the resources mobilized and the capital projects for which they are intended. However, Sukuk should complement, rather than substitute for, full compliance with the Act. The fact that a loan is raised through Sukuk does not automatically establish that the borrowing satisfies the statutory requirements. Proper project appraisal, legislative scrutiny, debt sustainability analysis, procurement compliance and expenditure monitoring remain indispensable.
There is also a compelling case for state governments to embrace Sukuk more actively. Given the enormous infrastructure requirements at the subnational level, state governments should explore domestic Sukuk issuances to finance roads, schools, water projects, markets and other essential public infrastructure. States with viable revenue-generating assets or identifiable public infrastructure projects could develop their own Sukuk programmes, subject to the necessary legal approvals, credit assessments and investor requirements.
This would deepen the domestic capital market, provide institutional investors with additional investment opportunities and reduce exclusive dependence on conventional bank loans and government bonds. It would also encourage greater discipline in project selection, preparation and implementation, since successful Sukuk issuance requires clearly defined underlying transactions and credible financing arrangements.
By and large, the issue is not whether borrowing by the government should stop altogether. A country with enormous infrastructure deficits and development aspirations cannot reasonably expect to finance all its requirements from current revenue. Borrowing, when properly structured and prudently managed, can be an important instrument of economic transformation. The more fundamental issue is the quality, purpose, structure and accountability of the borrowing. Nigeria must move away from a debt management approach that places disproportionate emphasis on how much money can be raised towards one that gives equal, if not greater, attention to what the money will finance, how it will be spent and what measurable economic and social benefits will accrue to citizens.
The proposed $20.52 billion and pound 1.045 billion external borrowing should therefore provide an opportunity for a fundamental rethink of the country’s financing strategy. Rather than a complete resort to conventional loans, the Federal Government should undertake a serious assessment of the proportion of its proposed infrastructure financing that can be mobilized through international Sukuk.
The National Assembly, in considering the proposed borrowing plan, should also request a comparative assessment of conventional external loans and Sukuk, including their respective costs, repayment obligations, foreign exchange implications, underlying asset requirements and accountability mechanisms. This would enable legislators to consider not only the amount Nigeria intends to borrow but also the financing structures that can best support the delivery of the projects for which the borrowing is intended.
It goes without saying that Nigeria does not necessarily have a shortage of financing instruments. What it urgently needs is a financing framework that restores confidence in the relationship between public borrowing and public benefit. Scaling up Sukuk, in both domestic and international capital markets, offers an opportunity to achieve this objective. The relatively small Sukuk issuances undertaken so far have helped finance identifiable road infrastructure and demonstrated the instrument’s practical relevance to Nigeria’s development needs. A substantial expansion of the programme could make a much greater contribution to infrastructure development, while broadening the investor base and strengthening project-level transparency.
All said, government borrowing should not merely create additional liabilities for future generations; it should create enduring assets that improve productivity, expand economic opportunities and raise living standards. Sukuk, properly structured and transparently administered, can help Nigeria move closer to that objective.
Uche Uwaleke, a financial Economist, is Director of the Nasarawa State University Institute of Capital Market Studies and President of the Capital Market Academics of Nigeria. He is also a member of Daily Trust Board Of Economists.