Oyedele Defends Nigeria’s $21.7 Billion Loan Plan: Can Borrowing Deliver Prosperity?

By OBI DAVIES

NIGERIA’S proposed $21.7 billion external borrowing programme has reignited debate over the government’s approach to financing development, managing public debt and improving living conditions. While critics question the scale of the proposed loan, Finance Minister Taiwo Oyedele insists that the country needs access to financing to build infrastructure, expand productive capacity and sustain economic growth.

Speaking to State House correspondents on Wednesday after the Federal Executive Council meeting, Oyedele argued that borrowing remains a normal feature of national economic management. According to him, the critical issue is not simply how much a government borrows, but whether the money creates lasting economic value.

Nevertheless, his defence raises an important question: can the proposed financing deliver sufficient returns to justify its costs and repayment obligations?

Borrowing for Development or Expanding Debt Exposure?

Oyedele maintained that no country can operate entirely without borrowing. He therefore urged Nigerians to assess the proposed financing by examining the infrastructure it would deliver, the productive assets it would create and its potential contribution to sustainable economic growth.

Describing the plan as investment rather than borrowing, the minister argued that the projects would generate long-term economic value. The proposed package, expressed in dollar and euro equivalents, would support transportation, security, healthcare, agriculture, energy, digital infrastructure, education and social welfare.

However, the distinction between investment and borrowing requires careful scrutiny. Although a loan may finance productive assets, the government must still repay the principal and interest. Consequently, the programme’s success will depend on project selection, implementation, cost control and the economic benefits generated over time.

For that reason, the central test should be whether the funded projects improve productivity, create jobs, reduce business costs and generate benefits that outweigh the financial obligations.

Transportation Takes the Largest Share

Transportation infrastructure accounts for the largest identified portion of the proposed package. Oyedele disclosed that approximately $10.6 billion would support strategic road and railway projects.

Among the projects he identified were the Sokoto–Badagry and Lagos–Calabar coastal highways, alongside the Kano–Kaduna railway corridor.

According to the minister, the government is exploring financing arrangements with multilateral institutions, bilateral development partners and other funding sources to advance these initiatives and other national development priorities.

Such infrastructure could strengthen connectivity, facilitate trade and improve the movement of people and goods. Moreover, dependable transport networks can reduce logistics costs and create opportunities for businesses operating across different regions.

Yet infrastructure spending does not automatically translate into economic prosperity. To secure meaningful returns, the government must ensure that projects meet clear delivery targets, adhere to transparent procurement procedures and avoid excessive cost overruns. Equally important, completed roads and railways must remain properly maintained and accessible to the people and businesses expected to benefit.

Concessional Loans Offer Relief, but Accountability Remains Essential

Oyedele said approximately $7.9 billion of the financing package would come from multilateral and bilateral development institutions, with the World Bank accounting for a substantial share.

He disclosed that the proposed World Bank component would amount to $5 billion, with an average interest rate of approximately 2.1 per cent. Certain facilities earmarked for social development programmes, he added, would attract rates of about two per cent.

The minister argued that concessional financing would reduce borrowing costs and provide more sustainable repayment conditions than conventional commercial loans.

Indeed, relatively favourable interest rates can ease the pressure on public finances. Nevertheless, the full cost of a foreign loan depends on more than its interest rate. Repayment periods, grace periods, fees, currency movements and the terms attached to each facility also matter.

Because the proposed financing is denominated in foreign currencies, exchange-rate movements could affect the naira cost of servicing the debt. Therefore, authorities must evaluate the package’s complete repayment obligations rather than rely on headline interest rates alone.

Furthermore, Nigerians need clear information about the terms of each facility, the projects it will finance and the safeguards that will prevent diversion or waste.

Inflation Falls, but Household Relief Remains the Real Test

Beyond borrowing, Oyedele expressed confidence that the government could reduce inflation to a single-digit rate by the end of 2027, or sooner. He attributed this optimism to improvements in price stability and other macroeconomic indicators.

The minister reported that headline inflation fell to 14.63 per cent in September, compared with 20.98 per cent during the corresponding period of the previous year. He also recalled that inflation had earlier peaked at approximately 34 per cent.

Although the reported decline suggests easing inflationary pressure, it does not mean that prices have returned to previous levels. Rather, slower inflation generally means prices are rising at a slower rate. Consequently, many households may continue to struggle with the accumulated cost of food, transport, housing and other necessities.

Oyedele said the Federal Executive Council had agreed to strengthen interventions aimed at containing inflation, particularly food-price pressures, while sustaining investments in infrastructure, human capital and employment.

However, achieving single-digit inflation will require more than an official target. The government must demonstrate that its policies can improve food supply, reduce production and distribution costs, strengthen economic confidence and protect households from persistent price pressures.

Stronger Reserves & Growth Provide Encouragement

The minister also highlighted improvements in Nigeria’s external financial position. According to him, foreign exchange reserves had exceeded $55 billion, their highest level in 18 years, while net reserves had risen above $45 billion from less than $1 billion three years earlier.

Additionally, he reported that economic growth reached 4.43 per cent in the second quarter, compared with 2.74 per cent in May 2023. He also said the economy’s performance had improved when measured in dollar terms.

These indicators provide context for the government’s defence of its economic programme. Stronger reserves can help improve external confidence and provide a buffer against financial shocks, while faster economic growth may support employment and government revenue.

Nevertheless, macroeconomic improvements must translate into tangible gains for ordinary Nigerians. Growth figures alone do not reveal how evenly prosperity is distributed or whether households are experiencing stronger purchasing power.

Therefore, the government must connect its reported gains to measurable improvements in wages, jobs, access to essential services and the cost of living.

Tax Reforms & Debt Servicing: Progress Under Scrutiny

Oyedele attributed stronger government revenue to ongoing fiscal and tax reforms. He said Nigeria’s tax-to-GDP ratio increased from approximately seven per cent in 2023 to 12.5 per cent by the end of 2025.

He also maintained that the proportion of government revenue committed to debt servicing had declined from 97 per cent to below 60 per cent, creating greater room for development spending.

If sustained, stronger revenue mobilisation and a lower debt-service burden could improve the government’s ability to fund public services without relying excessively on new loans. However, the figures require continued monitoring, including clarity about the revenue measures, periods and calculations used.

More importantly, a lower debt-service-to-revenue ratio does not by itself establish that public debt has become sustainable. The government must also account for its total obligations, repayment schedules, contingent liabilities and exposure to foreign-exchange risks.

The Ultimate Test Is What Nigerians Receive

Oyedele’s defence rests on the argument that Nigeria should borrow to finance investments capable of delivering long-term economic benefits. That principle can support development when governments choose sound projects, secure reasonable terms and manage public funds effectively.

However, the scale of the proposed $21.7 billion package makes transparency and accountability indispensable. Nigerians need to know how much the government will ultimately draw, which projects will receive the funds, when those projects will be completed and how their economic benefits will be measured.

The government must also explain how it will manage repayment obligations without undermining essential services or placing additional pressure on future budgets.

Ultimately, the success of the borrowing programme will not depend on whether officials describe it as investment rather than debt. It will depend on whether the financing produces valuable infrastructure, stronger productivity, sustainable employment and measurable improvements in living standards.

For a country seeking faster growth and greater economic stability, borrowing can be a development instrument. Without disciplined implementation and transparent oversight, however, it can also become a burden that outlasts the projects it was intended to finance.