By Rekpene Bassey
Nigeria, Africa’s most populous nation and its largest economy by nominal GDP, currently faces a grave fiscal dilemma. With an external debt stock over $22.7 billion and domestic debt at ₦27.33 trillion, the country’s debt trajectory has become the subject of intense debate among economists, lawmakers, and development partners.
The question now looms: is Nigeria on the brink of a debt-fueled economic crisis, or can this challenge be transformed into an opportunity for structural reform and fiscal rebirth?
The rising tide of public debt is putting unprecedented strain on the country’s fragile economy.
In 2023, over 73 per cent of Nigeria’s revenue was consumed by debt servicing obligations, leaving precious little for investment in health, education, infrastructure, and other vital sectors. This stark fiscal reality has translated into underperforming public services and an erosion of the developmental gains needed to improve the lives of Nigeria’s 200 million citizens.
Senator Ali Ndume, a prominent voice in Nigeria’s National Assembly, has become one of the administration’s most vocal critics. In a pointed intervention, Ndume accused the Tinubu-led government of securing approximately $9.45 billion in loans without due legislative oversight. He contends that the lack of transparency and accountability in how these funds are deployed is even more troubling.
“We see no roads, bridges, or schools,” Ndume noted. “Just paperwork and promises.” His remarks reflect a broader frustration with what many perceive as a borrowing spree without a coherent investment strategy.
Indeed, Nigeria’s National Debt Management Framework data reveal a worrying pattern. Between 2023 and 2027, over 84 per cent of budget deficits are projected to be financed through new loans, with 2022 as the lone exception.
This overreliance on borrowing to fund recurrent expenditures rather than capital projects has sparked fears of a looming debt trap, one that could handcuff future generations with crippling repayment obligations.
Equally concerning is the opacity surrounding loan agreements. Critics point to examples such as the $500 million loan earmarked for a women’s empowerment program and the $800 million “cushion fund” to mitigate the impacts of fuel subsidy removal.
While well-intentioned on paper, these initiatives are shrouded in ambiguity regarding their scope, execution, and measurable outcomes. Without clear impact assessments, these loans raise uncomfortable questions about governance, fiduciary responsibility, and the return on investment of Nigeria’s external commitments.
Renowned economist and former Deputy Governor of the Central Bank of Nigeria, Dr. Kingsley Moghalu, sees the debt crisis as symptomatic of deeper structural rot. “This is not just a budgeting problem; it’s a governance problem,” Moghalu argues. “Corruption, lack of institutional discipline, and an inability to prioritise national development over political expediency are at the core of this crisis.”
Therefore, he calls for far-reaching reforms that go beyond fiscal arithmetic, urging the government to embrace transparency, invest in infrastructure, and foster conditions for sustainable economic growth.
The International Monetary Fund has issued similar warnings, categorising Nigeria’s debt dynamics as increasingly unsustainable. The IMF recommends urgent fiscal consolidation, improved tax administration, and rationalising government expenditures. Without these measures, the Fund warns, Nigeria risks economic stagnation, deteriorating credit ratings, and a downward spiral of investor confidence.
The consequences of Nigeria’s borrowing habits are not abstract. They are tangible, and they are unfolding. Skyrocketing insecurity, crumbling road networks, ailing public hospitals, underfunded universities, and record levels of youth unemployment are all symptoms of a state unable to translate its resources and revenues into meaningful development. As debt service obligations grow, they crowd out the investments needed to reverse these trends, creating a vicious cycle of dependency and underdevelopment.
This scenario is further compounded by declining foreign investor interest. As Nigeria’s sovereign credit ratings strain and fiscal risks mount, investor confidence is waning. This is particularly damaging for a country that desperately needs capital inflows to power its industrial base, expand infrastructure, and diversify its economy away from oil dependence.
At the macroeconomic level, Nigeria’s borrowing has also contributed to inflationary pressures and exchange rate instability. Central Bank financing of deficits, combined with weak revenue performance, has eroded the naira’s purchasing power and placed upward pressure on prices. This translates into rising food costs, shrinking incomes, and worsening poverty for ordinary Nigerians, making conditions ripe for social unrest.
Yet amid the bleak headlines, there lies a path toward redemption. Debt, when strategically deployed, is not inherently harmful. Many of the world’s most advanced economies have leveraged borrowing to stimulate growth, build infrastructure, and drive innovation. What matters is the amount borrowed and how effectively those funds are utilised.
Nigeria must radical overhaul its debt management framework to reverse course. Borrowing must be strictly tied to high-impact projects with clear developmental outcomes—effective security, roads, railways, power plants, digital infrastructure, and educational facilities. To ensure accountability, each project must have a transparent procurement process, measurable performance indicators, and post-implementation audits.
Furthermore, domestic revenue mobilisation must become a cornerstone of Nigeria’s fiscal policy. With a tax-to-GDP ratio of just 6.5 per cent, one of the lowest in the world, there is vast potential to increase revenues by widening the tax net, eliminating leakages, and improving compliance. A well-functioning tax system boosts government revenue and strengthens the social contract between the state and its citizens.
Simultaneously, public financial management must be modernised. Every naira must be accounted for, from borrowing and disbursement to expenditure and evaluation. Legislative oversight bodies, the Office of the Auditor General for the Federation, anti-corruption agencies, and civil society must be empowered and resourced to fulfil their watchdog roles. Fiscal discipline must replace budgetary indiscipline.
Nigeria may need to renegotiate some of its debt terms where necessary. Debt restructuring, maturity extensions, or debt-for-development swaps are viable options if approached strategically and credibly. But such negotiations must be built on trust, transparency, and sound economic reform, not desperation.
Ultimately, Nigeria’s debt crisis requires a national reckoning. Dr. Pius Mordi aptly says, “This is not a partisan issue. It is a generational issue.” The country must transcend political divisions and unite behind a common goal: to restore fiscal health, rebuild public trust, and secure a future of shared prosperity.
The stakes are extraordinarily high. Nigeria can either continue down the path of opaque borrowing, underwhelming governance, and perpetual fiscal fragility or chart a new course rooted in prudence, accountability, and ambition. The crisis is real, but so is the opportunity to act now.
*Rekpene Bassey is the President of the African Council on Narcotics (ACON) and a security and drug prevention expert.
