THE rise of Nigeria’s debt profile to an alarming N142 trillion has sparked widespread concerns among citizens and international observers. With debt servicing projected to consume a staggering N15.81 trillion, 33.1 per cent of the federal government’s planned N47.90 trillion expenditure for the 2025 fiscal year, the financial sustainability of Africa’s largest economy hangs in the balance.
The President Bola Tinubu administration has added over $1.95 billion in loans from the World Bank alone since assuming office, further exacerbating the country’s debt situation. The problem, however, did not start with the Tinubu administration. Under former President Muhammadu Buhari, Nigeria witnessed an unprecedented surge in public debt. External debt soared by $28.57 billion in 2020, while domestic debt climbed by N16.02 trillion, increasing the federal government’s debt burden by over 173 per cent.
At the heart of Nigeria’s debt crisis is the high cost of governance. The country’s bloated political structure, which includes 109 senators and 360 members of the House of Representatives, comes with an enormous financial burden. Added to this is the large number of ministers, special advisers, and other political appointees that makes the cost of running the government unsustainable.
Beyond governance, Nigeria’s debt challenge is compounded by a weak revenue base. Despite being one of the largest oil producers in the world, Nigeria has struggled to diversify its economy and generate sufficient revenue from non-oil sector. Tax evasion, leakages in revenue collection, and an over-reliance on oil revenues have left the government with limited fiscal space.
The social implications of this debt burden are equally concerning. With debt servicing taking up such a large share of government expenditure, critical sectors are often underfunded. This leads to poor educational outcomes, dysfunctional healthcare, and crumbling infrastructure, all of which hinder economic growth and exacerbate poverty. The burden of repaying these loans will ultimately fall on future generations, creating an intergenerational equity issue that policymakers cannot ignore.
Internationally, Nigeria’s rising debt has attracted the attention of creditors and rating agencies. While borrowing remains necessary for developing economies, excessive dependence on external loans exposes the country to exchange rate risks and the whims of international financial markets. A potential debt crisis could damage Nigeria’s credit worthiness, making it more difficult and expensive to access future loans.
Moving forward, Nigeria needs a comprehensive debt management strategy with an eye on sustainability. This includes prioritizing concessional loans with favorable terms, increasing domestic revenue, and ensuring that borrowed funds are channeled into productive ventures.
Equally important is the need for transparency and accountability in public finance. Citizens have the right to know how their country’s debts are incurred and how the funds are utilized.
Another effective ways to reduce Nigeria’s mounting debt profile is to streamline portfolios through merger of ministries and agencies with overlapping functions.
Moreover, Nigeria is richly endowed with resources like rubber, timber, cocoa, and cassava, which remain largely underutilized despite their potential to boost revenue and reduce dependence on oil. Cocoa, once a cornerstone of the economy, still thrives as a major foreign exchange earner for nations like Ghana and Côte d’Ivoire.
To address its debt burden, the current dependence on federal allocations must give way to states to tap into their resources rather than over-relying on allocations. States should focus on agriculture and manufacturing to widen their revenue base. By harnessing these resources, Nigeria can build a more balanced and self-sustaining economy.
As Nigeria stands at the crossroads of fiscal policy and economic survival, a bold leadership is required to steer the nation away from a full-blown debt crisis. The government must balance the need for development financing with the imperative of fiscal discipline. Failure to address these issues will not only jeopardize Nigeria’s economic stability but also compromise its future.
