Nigeria shifts from costly foreign debt to private capital model
Nigeria is repositioning its development financing strategy, moving away from high-cost external borrowing toward a framework anchored on domestic reforms and private investment, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has said.
Speaking at the G-24 Technical Group Meeting in Abuja, Edun outlined a recalibrated growth model designed to reduce fiscal vulnerabilities, strengthen macroeconomic stability and unlock long-term capital inflows.
The event, convened under the platform of the Intergovernmental Group of Twenty-Four, brought together policymakers from emerging and developing economies to deliberate on global financial reforms.
According to the minister, Nigeria is deliberately pivoting from an overreliance on expensive external borrowing toward a resilient financing structure powered by structured public-private partnerships, asset optimisation and diversified capital instruments.
He said the country is targeting average medium-term growth of seven per cent, a goal that would require raising the investment-to-GDP ratio to at least 30 per cent. With public sector financing capacity currently estimated at roughly five per cent of GDP, the strategy places private capital mobilisation at the centre of economic expansion.
Domestic reforms underpin Nigeria shifts from costly foreign debt
Edun explained that the transition reflects a broader reform agenda introduced by President Bola Tinubu, structured around market correction, stabilisation and growth acceleration.
Over the past two years, the administration has implemented policy adjustments aimed at restoring macroeconomic balance, including fiscal consolidation, exchange rate reforms and subsidy rationalisation.
These measures, he said, have begun to rebuild investor confidence and reposition Nigeria as a credible investment destination.
Early indicators, according to the minister, show renewed capital commitments from international and domestic investors. He cited a $20bn investment commitment by Shell plc as evidence of improved sentiment toward the Nigerian market.
The minister argued that the shift away from expensive external borrowing aligns with evolving global development finance trends, which emphasise blended finance, innovative instruments and expanded concessional windows rather than traditional sovereign debt accumulation.
Strengthening fiscal buffers through revenue reform
To reinforce the strategy, Edun said the government is advancing a comprehensive domestic resource mobilisation drive. The objective is to raise Nigeria’s tax-to-GDP ratio to 18 per cent in the medium term through legislative modernisation, automation and compliance improvements.
Reforms include implementation of a modernised tax framework, deployment of revenue optimisation platforms, a Central Billing System and the National Single Window initiative to streamline trade processes and reduce leakages.
He stressed that strengthening internal revenue generation is critical to sustaining the pivot from costly foreign borrowing. By expanding fiscal buffers and improving expenditure efficiency, Nigeria can reduce exposure to volatile external financing conditions.
Data from the Debt Management Office show that Nigeria’s external debt rose to $46.98bn as of June, up from $45.98bn in March. Multilateral institutions account for nearly half of the total, with the International Development Association emerging as the largest single creditor.
Commercial borrowings — largely Eurobonds — represent a substantial share of the portfolio, leaving the country sensitive to global interest rate movements and investor risk appetite. Analysts note that reducing reliance on such instruments is central to the credibility of Nigeria shifts from costly foreign debt.
Global headwinds and South-South cooperation
Edun described the current global environment as increasingly fragmented, marked by geopolitical rivalry, protectionist trade policies and weakened multilateral cooperation.
He warned that escalating geoeconomic tensions could shave up to two percentage points off global output and reduce trade volumes by over two per cent.
Emerging markets are particularly vulnerable. More than a quarter have reportedly lost access to international capital markets, while many low-income countries face heightened debt distress.
Against this backdrop, Edun urged stronger South-South collaboration and a unified push for reforms in the global financial architecture.
He called for expanded concessional lending by multilateral development banks, reinforcement of the International Monetary Fund’s safety net and greater access to local currency financing mechanisms.
“The era of waiting for external flows to drive development is over,” he said, emphasising that countries must build resilience through domestic reform and regional integration.
Linking infrastructure to inclusive growth
The minister noted that Nigeria’s financing transition is closely tied to major infrastructure initiatives, including the Lagos–Calabar Highway and ongoing power sector reforms. These projects are expected to stimulate employment, enhance productivity and crowd in private sector participation.
By structuring infrastructure as bankable, de-risked investments, the government aims to attract institutional investors, sovereign wealth funds and development finance institutions without excessively expanding sovereign liabilities.
Observers say the credibility of Nigeria shifts from costly foreign debt will depend on consistent policy execution, transparent governance and sustained macroeconomic discipline.
Outlook for capital mobilisation
Edun maintained that the reform trajectory has already improved Nigeria’s standing in global investment circles. However, he acknowledged that maintaining momentum will require continued fiscal prudence, regulatory clarity and investor-friendly policies.
He urged G-24 member states to harmonise positions in advocating reforms that address the widening Sustainable Development Goals financing gap and support countries navigating constrained fiscal space.
For Nigeria, the strategic pivot represents more than a fiscal adjustment. It signals an attempt to rebalance the development model — reducing dependence on volatile external borrowing while leveraging private capital to drive structural transformation.
As global financial conditions remain uncertain, policymakers face the challenge of sustaining investor confidence while protecting macroeconomic stability.
Whether Nigeria shifts from costly foreign debt translates into durable growth will depend on the interplay between reform depth, capital mobilisation and institutional resilience.
