According to the Medium Term Expenditure Framework (MTEF), Nigeria is set to borrow over ₦11 trillion next year to fund its budget deficit. That’s about 5% of our GDP—higher than the 3% threshold stated by the fiscal responsibility act of 2007.
There are no signs that the government will soon reduce its record-high borrowing trend. Even worse, the ministry of finance and the budget office have already budgeted to spend more on petrol subsidies than the government will earn.
With the above track record of borrowing and spending, it might be easy to conclude that investors and lenders will be unwilling to give the Nigerian government even more money. But the reality is far from that. While speaking about this in the Stears Newsroom, our finance analyst, Yomi, commented that "even with Nigeria's debt servicing ratio being more than 100%, when the FG issues a bond, it would still be oversubscribed (lenders were willing to invest more money than Nigeria requested)".
So that’s what I want us to focus on today. Why would any investor be willing to give Nigeria more money when it is clearly in fiscal distress?
Run for safety
The first thing we need to understand is that lending is an investment. I give you money for some time; you give me back at a