Why We Need Fresh $21.7bn Loan — Finance Minister

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has defended President Bola Tinubu’s request for legislative approval of a $20.52bn and €1.045bn external financing plan, saying the funds would support infrastructure development and investments across key sectors of the economy.

Oyedele spoke on Wednesday during a briefing with State House correspondents after the Federal Executive Council meeting chaired by Tinubu. His comments followed criticism over the government’s failure to provide a detailed breakdown of the projects expected to benefit from the proposed financing.

Senate President Godswill Akpabio had read Tinubu’s request to the Senate on Tuesday, seeking approval for the supplementary external borrowing plan to fund projects and programmes across several sectors.

The finance minister said the combined value of the dollar and euro components amounted to approximately $21.7bn. He argued that the proposal should be viewed as an investment plan rather than an immediate decision to borrow the entire amount.

According to Oyedele, the request does not mean the government has already secured the funds or will necessarily draw the full amount. He added that the projects covered by the plan had an average lifespan of five years, making long-term financial planning necessary.

He explained that the proposed financing would focus on transportation, defence and security, healthcare, agriculture, energy and power, digital infrastructure, finance and micro, small and medium-sized enterprises, social protection, environmental programmes and education.

Transportation infrastructure accounts for approximately $10.6bn of the proposed financing, making it the largest category. Projects expected to benefit include the Lagos-Calabar Coastal Highway, Sokoto-Badagry Superhighway and Kano-Kaduna railway, alongside other major infrastructure developments.

Oyedele maintained that borrowing for productive investments could improve the country’s financial position if the assets and economic benefits generated exceeded the cost of the funds.

He argued that large-scale projects often require external financing because their costs may be too high to cover through accumulated savings within a reasonable period. Using Aliko Dangote’s refinery as an example, the minister said securing financing had enabled the industrial project to be completed faster than would have been possible through savings alone.

He added that the proposed investments were expected to create long-term value for Nigeria and its citizens, although the benefits would depend on how effectively the funds were deployed and the projects delivered.

The minister also disclosed that part of the financing would support social development programmes covering healthcare, education, agriculture, energy, climate initiatives and social protection.

He said this component was expected to attract concessional loans at an average interest rate of about two per cent, describing the terms as favourable compared with more expensive commercial borrowing.

Oyedele identified multilateral and bilateral development partners as key sources of the proposed financing, with approximately $7.9bn expected from such partners. He said the World Bank would account for $5bn of that amount through concessional financing at an average interest rate of 2.1 per cent.

Other potential sources include regional development finance institutions, export credit agencies and commercial banks. For the commercial component, the minister said the indicative average interest rate was 7.8 per cent, which he described as lower than the rates associated with Nigeria’s Eurobonds.

He argued that the proposed financing arrangements would help the country secure funds for development projects on terms that could reduce borrowing costs, particularly for investments with long-term economic and social benefits.

Oyedele further clarified that the financing plan was not intended solely for projects controlled by the Federal Government. He said some of the funds would support state governments, the Federal Capital Territory and other subnational projects.

According to the minister, $3.3bn had been earmarked for state government projects, while $1.5bn was intended for projects in the FCT. Together, these allocations amount to $4.8bn for subnational projects, agencies and development finance institutions.

He explained that the Federal Government acts as the interface for external borrowing because of its constitutional responsibilities, even when the funds are intended to support projects undertaken by state governments.

The minister urged Nigerians to assess the proposed financing based on its intended uses and the value it could generate, rather than viewing all borrowing as harmful to the economy.

He maintained that borrowing could support economic development when the funds were invested in productive assets, infrastructure, human development and the digital economy, provided the resulting benefits justified the financial obligations.

However, the proposal has attracted criticism over the scale of the financing and the need for greater clarity about the specific projects, borrowing terms and expected returns. The government’s defence rests on its argument that the plan would fund long-term investments capable of generating economic value beyond the cost of the loans.