Nigeria's $6bn Borrowing Raises Fiscal Prudence Concerns

Afrinvest's recent report expresses significant concerns regarding Nigeria's approval for $6 billion in external borrowing, warning of potential fiscal prudence issues. The report highlights that the ongoing energy price shocks and prolonged crises in the Middle East present material downside risks to Nigeria's already fragile food security position.

It notes that rising fertilizer prices could lead to a 10% to 20% reduction in application rates, further pressuring food security. The report also mentions a 0.5% month-on-month decline in Nigeria's external reserves, now at $49.4 billion, exacerbated by risk-averse foreign investors.

Additionally, it raises questions about the legal and fiscal basis for the proposed 2026 budget of N58.2 trillion, which includes a borrowing provision of N8.3 trillion, potentially doubling the previous year's external borrowing. The report emphasizes the need for stricter alignment of borrowing with fiscal frameworks to enhance discipline and stabilize Nigeria's macroeconomy.