Nigeria Targets $2.8bn Through Global Sukuk and Fresh Loans to Tackle Budget Gap, Boost Investor Confidence
Story Written by Myra Chinonso October 8,2025
Investigative Report: Nigeria Eyes Global Sukuk Debut and New Borrowings Amid Debt Pressure and Reform Drive (October 2025)
Nigeria is moving closer to its first-ever international sovereign sukuk issuance, alongside plans for $2.3 billion in new loans, as President Bola Tinubu seeks parliamentary approval to raise a total of $2.8 billion to cover fiscal shortfalls and refinance maturing debts.
The move signals a bold attempt to diversify Nigeria’s funding sources while reducing borrowing costs through non-traditional Islamic finance instruments and environmentally friendly bonds.
1. Breaking Down the Borrowing Plan
In a letter to the National Assembly read on Tuesday, President Tinubu requested legislative approval for:
- $2.3 billion in new international loans, and
- A $500 million global sukuk issuance — Nigeria’s first on the international market.
According to the president, the funds will be used to:
- Part-finance the 2025 budget deficit, and
- Refinance maturing Eurobonds due in November 2025.
The financing could come through Eurobond sales, syndicated loans, bridge financing, or direct bilateral loans from international banks.
2. Finance Ministry Eyes Cheaper Borrowing Channels
At the Nigerian Economic Summit in Abuja on Monday, Finance Minister Wale Edun revealed that the government is shifting focus toward green bonds, sukuk, and diaspora bonds — which he described as more cost-effective than Eurobonds.
“We are deliberately turning to sustainable and Islamic finance instruments that attract lower yields and align with our fiscal and climate priorities,” Edun told delegates.
This strategic pivot follows the government’s broader effort to cut debt service costs and enhance debt sustainability, especially after years of heavy Eurobond dependence.
3. Nigeria’s Fiscal Position Improves but Risks Persist
The Debt Management Office (DMO) confirmed last month that Nigeria could issue up to $2.3 billion in international bonds before the end of 2025, subject to favorable market conditions.
The country’s fiscal outlook has improved in 2025, thanks to reforms under Tinubu’s administration — including fuel subsidy removal, exchange rate unification, and tax harmonization efforts.
Credit rating agencies have responded positively. Moody’s and Fitch Ratings have noted Nigeria’s improved external liquidity position and policy consistency, giving the country a “stable outlook.”
However, analysts warn that high debt servicing — consuming over 73% of revenue in 2024 — remains a major concern, especially amid sluggish revenue growth.
4. Understanding the Global Sukuk Strategy
A sukuk is an Islamic bond structured to comply with Sharia law, which prohibits interest payments. Instead, investors receive returns linked to tangible assets or profit-sharing arrangements.
Nigeria’s proposed $500 million debut sukuk aims to replicate the success of its domestic sukuk program, which has raised over ₦742 billion since its inception in 2017 for infrastructure and road development projects.
Tinubu’s letter stated that the sukuk could be issued “with or without credit enhancements from the Islamic Corporation for the Development of the Private Sector (ICD).”
This approach mirrors moves by other African nations such as Egypt and South Africa, which have tapped Islamic finance markets to attract investors from the Middle East and Asia.
5. Debt Structure and Market Timing
Nigeria’s return to global capital markets comes nearly three years after its last international bond sale in December 2022.
The government’s latest plan could help roll over maturing Eurobonds while providing liquidity for the 2025 fiscal year. Analysts, however, caution that timing will be crucial, as global interest rates remain elevated due to the U.S. Federal Reserve’s tight policy stance.
“Nigeria’s improved credit metrics could reduce yields, but global borrowing costs are still high. The sukuk might attract niche investors seeking ethical and emerging-market assets,” said Bismarck Rewane of Financial Derivatives Company.
6. Outlook: Reform Momentum and Investor Perception
Nigeria’s success in securing favorable borrowing terms will largely depend on investor confidence in Tinubu’s reform agenda and macroeconomic stability.
If executed strategically, the dual funding approach — via Islamic finance and conventional loans — could help Nigeria:
- Reduce refinancing pressure,
- Broaden its investor base, and
- Signal fiscal discipline to global markets.
Yet, with the country’s public debt exceeding ₦97 trillion as of Q3 2025, fiscal prudence remains critical. Economists advise the government to channel new borrowings into productive sectors like infrastructure, agriculture, and manufacturing rather than recurrent expenditure.
