In the first year of President Tinubu’s administration, the Federal Government borrowed N20.1 trillion from domestic investors, a year-over-year YoY increase of 117% from the year before. This raised concerns about the impact on the economy, including the possibility of increased inflation pressure, higher debt service costs, and higher business borrowing costs.
According to analysts, the Federal Government’s recent sharp increase in borrowing has the potential to exacerbate the nation’s historically high inflationary trend. This could result in additional interest rate hikes by the Central Bank of Nigeria (CBN), which would raise borrowing costs for both individuals and businesses.
Through the issuance of FGN Bonds, FGN Savings Bonds, and Sukuk Bonds by the Debt Management Office, DMO, the Federal Government borrows money from domestic investors. The Nigeria Treasury Bills, or NTBs, are additionally issued by the CBN on behalf of the FG.
Financial Vanguard’s analysis of DMO and CBN data revealed that the FG borrowed N20.09 trillion through these instruments in the 12 months ending May 31st (June 2023 to May 2024), which coincided with President Bola Tinubu’s first year in office. This represents a YoY increase of 117% from the N9.275 trillion borrowed in the previous 12 months, namely June 2022 to May 2023.
The CBN’s NTBs auctions accounted for the majority of the increase in borrowing and for 66% of FG’s domestic borrowing during that time.