Tinubu Seeks National Assembly Approval for $2.3bn External Loan, $500m Sovereign Sukuk

President Bola Tinubu has formally requested the National Assembly’s approval for a fresh external loan of $2.3 billion, along with plans to issue a $500 million sovereign Sukuk—Nigeria’s first foray into the international Islamic finance market.

The request was contained in a letter read on the floor of the House of Representatives on Tuesday by Speaker Tajudeen Abbas. It aligns with Sections 21(1) and 27(1) of the Debt Management Office (DMO) Establishment Act, 2003.

Purpose of the Loan

According to the President, the proposed borrowing is aimed at:

• Supporting the implementation of the 2025 Appropriation Act

• Refinancing maturing Eurobonds

• Broadening Nigeria’s debt instruments by incorporating Islamic finance products

Tinubu noted that the 2025 fiscal framework projects $9.27 billion in total new borrowings, of which $1.84 billion is expected to come from external sources. The projections are based on an assumed exchange rate of ₦1,500 to the dollar.

The external financing will be sourced through a mix of Eurobonds, syndicated loans, bridge financing, and direct loans from multilateral institutions, depending on market conditions. This approach, Tinubu said, is designed to optimize costs and manage associated risks.

Eurobond Refinancing

A major component of the proposal involves refinancing a $1.118 billion Eurobond, issued in 2018 at a 7.625% coupon rate, which matures in November 2025. Tinubu described this move as “standard practice in debt capital markets,” noting that refinancing through Eurobonds or syndicated loans would boost investor confidence and support debt sustainability.

$500 Million Sovereign Sukuk

In a significant diversification move, Tinubu also proposed issuing a $500 million sovereign Sukuk in the international market. This marks Nigeria’s first international Sukuk, following the success of domestic issuances that have raised ₦1.39 trillion since 2017 for infrastructure projects like major road construction.

The President said the international Sukuk would:

• Help bridge the country’s infrastructure funding gap

• Attract non-traditional investors through Sharia-compliant instruments

• Enhance Nigeria’s presence in Islamic finance markets

To strengthen the issuance, the government is seeking a credit enhancement guarantee from the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank Group. With this guarantee, 25% of the Sukuk proceeds would go toward repaying high-interest debts, while the remaining funds would finance pre-approved infrastructure projects.

Safeguards and Strategic Planning

President Tinubu assured lawmakers that both the Federal Ministry of Finance and the Debt Management Office would work with experienced transaction advisers to ensure favorable pricing and terms, especially in light of current global market volatility.

He reiterated confidence in Nigeria’s standing as a “consistent and credible issuer” in the global debt market, stating that the proposed transactions would support prudent fiscal management and investor trust.

Broader Context

The new loan request comes amid Nigeria’s ongoing efforts to manage a sizable budget deficit and restructure its complex debt profile. Analysts view the government’s blend of domestic and international funding, including Islamic finance instruments, as a strategic response to high inflation, currency pressures, and rising global interest rates.

Experts also believe the planned involvement of ICIEC could improve Nigeria’s credit rating and reduce borrowing costs, making the Sukuk more appealing to international investors. The decision to allocate part of the proceeds to settle expensive debt is seen as a deliberate and cautious move to manage the nation’s debt burden more effectively.