Nigeria must raise federal revenue share or shift duties to states, Zrosk CIO says

Nigeria must either increase the Federal Government’s share of national revenue or transfer some of its responsibilities to state governments to address persistent fiscal challenges, according to Samson Esemuede, Chief Investment Officer at Zrosk Investment Management Ltd. He spoke on the Drinks and Mics podcast hosted by Ugo Obi-Chukwu, as President Bola Tinubu seeks Senate approval for a supplementary external borrowing plan of $20.52 billion and €1.05 billion for 2026 to 2027.

Borrowing request and revenue gap

Esemuede argued that the Federal Government’s borrowing needs are largely driven by a mismatch between the revenue available to it and the responsibilities it is expected to discharge. He said the Federal Government generates insufficient revenue to meet its obligations, forcing it to rely heavily on borrowing to finance expenditure.

"We look at the revenue that the federal government earns, which is not that much. And then in order for the federal government to live up to its obligation, it needs to borrow a lot," he said.

He maintained that the country’s fiscal deficits are not merely the result of poor spending decisions but also reflect structural weaknesses in the distribution of revenue and government responsibilities. "The deficits that the federal government run is by design, because the federal government itself doesn’t have the right claim to the right revenue to allow it to meet its obligation."

Esemuede said Nigeria must reconsider the relationship between revenue allocation and the responsibilities assigned to different tiers of government. "You either increase the claim of the federal government or you push the obligation down to the states," he said. His argument suggests fiscal sustainability requires better alignment between the resources available to each tier of government and the responsibilities it is expected to perform.

Tinubu’s $20.52 billion borrowing plan

Obi-Chukwu provided context for the proposed borrowing. He explained that the President’s request to the National Assembly covers external financing of $20.52 billion and €1.05 billion for the 2026 to 2027 period. The proposed funds are intended to support projects across critical sectors, including power, transportation, healthcare, agriculture, education, water supply, security and employment generation in all 36 states.

Obi-Chukwu noted that the government had justified the request by citing the urgent nature of the country’s development needs and the importance of stabilising the economy. However, he observed that the borrowing request did not provide a detailed list of prospective lenders or a project-by-project breakdown of the proposed expenditure. The absence of such details raises questions about how the funds will be sourced, allocated and monitored, particularly given Nigeria’s existing debt obligations.

Andrews and Dublin-Green weigh in

Tunji Andrews, Chief Executive Officer of Awabah, offered a different perspective. He argued that the scale of the proposed borrowing reflects the government’s ambition to attract international financing and address Nigeria’s development challenges. Using an analogy involving two glass-cup manufacturers, one operating in Nigeria and the other in Silicon Valley, Andrews suggested that businesses and countries must demonstrate the scale of their ambitions when seeking investment.

He argued that presenting a relatively small funding requirement for addressing structural economic problems could give investors the impression that the country was not serious about solving them. According to him, when the scale of the challenges is properly understood, the proposed amount may be insufficient. "That money is a drop in the ocean," he suggested.

Andrews clarified that his position was not an endorsement of reckless borrowing but a call for Nigeria to pursue the scale of investment required to break out of prolonged economic stagnation. "I have been around the block long enough to hear this kind of conversations happen for decades. And we are just going around in circles. I am saying we need escape velocity. And that escape velocity is not going to happen out of prudence," he said.

Arnold Dublin-Green, Chief Investment Officer at BGL Plc, argued that infrastructure and development needs are standard components of any major financing proposal. He noted that a country seeking substantial funding would naturally highlight the sectors where investment is most urgently required. "If Nigeria is trying to raise $20 billion, they’re going to say we need power, we need infrastructure. So he’s actually doing what you’re saying," he said.

Dublin-Green added that the government’s proposal was an indication that it recognised the country’s structural challenges and was seeking financing to address them. He said the government "is actually saying, I’m trying to fix the problem."

President Tinubu has defended the proposed borrowing, arguing that the financing is necessary to address Nigeria’s infrastructure deficit and bridge the funding gap for projects considered critical to the country’s socioeconomic development.

The debate matters for the naira and Nigerian businesses because the borrowing plan and revenue sharing affect fiscal sustainability and the cost of government obligations.