Nigeria’s Borrowed Prosperity, By Saheed Fuhad

A rustic that doesn’t sufficiently earn overseas alternate by means of exports and productive financial actions might finally discover itself borrowing new {dollars} to repay outdated greenback obligations. That is a cycle of economic vulnerability no accountable authorities ought to encourage.

There is a query Nigerians must be asking with rising urgency: How rather more debt can a rustic accumulate when it has not sufficiently expanded its capability to generate the income required to repay what it owes?

Nigeria’s rising urge for food for borrowing deserves critical nationwide consideration. Beyond the spectacular figures routinely introduced in financial stories, past the argument that the nation’s debt-to-GDP ratio stays inside internationally acceptable limits, and past authorities assurances that the economic system is on a path to restoration, there’s a basic fiscal downside that can not be ignored: Nigeria is fighting the price of servicing its current debt, but continues to hunt extra loans.

The hazard isn’t essentially that Nigeria will default tomorrow. The extra instant hazard is that the nation may regularly mortgage its fiscal future, leaving successive administrations with more and more restricted assets to manipulate, make investments, present social companies and reply to financial emergencies.

Borrowing isn’t inherently unhealthy. Developed economies borrow. Developing economies borrow. Even nations with robust economies challenge bonds and entry worldwide credit score markets. But accountable borrowing should have a transparent financial justification. It should finance investments able to increasing productiveness, producing employment, rising exports, enhancing authorities income and in the end strengthening the capability to repay. The important query for Nigeria is whether or not the dimensions and composition of its borrowing are producing enough financial returns.

The harmful consolation of the debt-to-GDP ratio

One of essentially the most incessantly deployed arguments in defence of Nigeria’s borrowing is that the nation’s debt-to-GDP ratio stays comparatively average in contrast with that of a number of different nations. On the floor, this sounds reassuring. However, it dangers complicated two completely different financial realities: the scale of an economic system and the monetary capability of its authorities to satisfy its obligations. GDP measures the worth of financial output. Government income, then again, represents the cash truly obtainable to the federal government to finance its tasks and repair its debt.

A rustic can have a comparatively giant GDP and nonetheless have a weak revenue-generating authorities. This is especially related to Nigeria, the place the capability to gather taxes and generate public income stays comparatively low in contrast with the scale of the economic system. Consequently, a debt inventory that seems manageable when measured in opposition to GDP can turn out to be extraordinarily burdensome when measured in opposition to precise authorities income.

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This is why the debt-to-revenue ratio deserves at the very least as a lot consideration because the debt-to-GDP ratio. According to the World Bank’s October 2025 Nigeria Development Update, Nigeria’s debt-service-to-revenue ratio was roughly 42 per cent in 2025. The report recognized the excessive value of servicing debt relative to authorities income because the nation’s principal debt vulnerability.

In different phrases, the issue isn’t merely how a lot Nigeria owes, it’s how a lot of the cash Nigeria earns should be surrendered to collectors earlier than the federal government can attend to its different obligations. The International Monetary Fund’s June 2026 evaluation presents one other troubling dimension. Interest funds alone have been estimated at 53.2 per cent of Federal Government income in 2025, with a projection of 53.7 per cent for 2026.

These are completely different indicators. The World Bank’s debt-service measure and the IMF’s interest-payment measure shouldn’t be confused. But each level to the identical underlying downside: debt is consuming a considerable share of the federal government’s monetary assets. When greater than half of federal income is absorbed by curiosity funds, what stays for schooling, healthcare, infrastructure, safety, housing, agriculture and different improvement priorities? This is the fiscal squeeze Nigeria should confront.

Borrowing in foreign currency: The exchange-rate hazard

There is one other dimension of Nigeria’s debt downside that deserves specific consideration: the hazard of extreme dependence on foreign-currency borrowing. Foreign loans might seem engaging as a result of worldwide lenders can provide giant financing packages, typically with longer reimbursement intervals and comparatively beneficial rates of interest. However, these loans introduce a danger that home borrowing doesn’t carry to the identical extent: exchange-rate publicity.

Nigeria earns most of its home authorities income in naira, however foreign-currency loans should be repaid in {dollars}, euros or different foreign currency. This creates a harmful mismatch.
Suppose Nigeria borrows $1 billion when the alternate charge is ₦800 to the greenback. The naira equal of that debt is ₦800 billion. If the naira subsequently depreciates to ₦1,500 to the greenback, the identical principal turns into ₦1.5 trillion in naira phrases, even earlier than curiosity and different prices are thought-about. The nation has not borrowed one other greenback, however its domestic-currency debt burden has elevated dramatically. This is the hazard of exchange-rate depreciation to a rustic whose income is predominantly denominated in native forex.

Foreign borrowing additionally exposes Nigeria to adjustments in worldwide rates of interest, international monetary circumstances, creditor necessities and refinancing dangers. Commercial overseas loans, significantly these with comparatively excessive rates of interest or shorter maturities, can turn out to be particularly costly. There can also be the query of alternative value. Dollars used to service overseas debt are {dollars} that can not be used for importing important equipment, medicines, industrial gear and different productive inputs.

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A rustic that doesn’t sufficiently earn overseas alternate by means of exports and productive financial actions might finally discover itself borrowing new {dollars} to repay outdated greenback obligations. That is a cycle of economic vulnerability no accountable authorities ought to encourage.

The phantasm of progress: When consumption outruns manufacturing

Perhaps one of the vital vital points in understanding Nigeria’s financial future is the excellence between financial progress and productive financial transformation. Nigeria’s GDP can develop with out the nation essentially constructing the economic capability required to maintain prosperity.

GDP isn’t fictitious just because consumption contributes considerably to it. Consumption is a reliable part of financial exercise, and companies may be extremely productive. However, an economic system whose progress isn’t accompanied by enough enlargement in home manufacturing, industrial capability, export earnings and productiveness might battle to maintain that progress and generate the overseas alternate wanted to satisfy exterior obligations
Consider the Nigerian economic system. We stay closely depending on imports for equipment, industrial inputs, prescribed drugs, refined petroleum merchandise and a number of other different important items. Our manufacturing sector faces persistent challenges involving electrical energy, infrastructure, entry to finance, overseas alternate and manufacturing prices.

The implication is {that a} important proportion of the cash circulating within the economic system finally creates demand for items and companies produced elsewhere. When consumption rises sooner than home productive capability, imports can rise, foreign-exchange pressures can intensify, and the economic system turns into extra susceptible to exterior shocks.

The World Bank’s October 2025 Nigeria Development Update highlighted the necessity for stronger productiveness, funding and competitiveness to translate macroeconomic reforms into improved residing requirements. Its evaluation of Nigeria’s rebased GDP additionally illustrates the structural problem. For 2024, agriculture accounted for about 27.2 per cent of GDP, business 16.3 per cent, together with manufacturing at 8.1 per cent and crude oil at 2.2 per cent, whereas companies accounted for 54.4 per cent.
These figures don’t recommend that companies are unimportant. Rather, they increase an vital query concerning the construction of our economic system and the extent to which financial exercise is translating into export competitiveness, industrial jobs and sustainable authorities income. A rustic can’t indefinitely depend on borrowing to finance consumption, imports and recurrent obligations with out strengthening the productive sectors that generate the assets required to repay these loans. The actual measure of financial progress mustn’t merely be how a lot an economic system grows, however how a lot wealth it produces, what number of jobs it creates, how a lot it exports and the way a lot sustainable income it generates.

The World Bank loans underneath Tinubu: What precisely are we financing? The quantity of World Bank financing authorised for Nigeria underneath President Bola Tinubu’s administration additionally deserves nearer public scrutiny. According to an evaluation printed by The Punch in July 2026, the World Bank authorised roughly $11.4 billion in financing for Nigeria between June 2023 and June 2026.

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This represents about 78 per cent of the $14.59 billion authorised throughout all the eight-year administration of former President Muhammadu Buhari. The determine is critical, particularly when seen in opposition to Nigeria’s current debt-service obligations. It is vital to tell apart mortgage approvals from precise disbursements. The similar evaluation reported that roughly $2.32 billion of the $11.4 billion authorised underneath Tinubu had been disbursed as of the most recent World Bank database replace examined by the newspaper. Approval doesn’t imply that all the quantity has already been acquired or spent.

Nevertheless, the dimensions of the commitments raises questions on priorities, implementation and measurable returns. Consider a few of the main World Bank financing preparations. In June 2024, the World Bank authorised a $2.25 billion package deal comprising $1.5 billion for Nigeria’s financial stabilisation and transformation reforms and $750 million for useful resource mobilisation reforms.
In September 2024, one other $1.57 billion was authorised for 3 programmes: $500 million for the Human Capital Opportunities for Prosperity and Equity Governance programme (HOPE-GOV). $570 million for the Primary Healthcare Provision Strengthening Programme (HOPE-PHC). $500 million for the Sustainable Power and Irrigation for Nigeria Project (SPIN).

There are additionally programmes such because the Adolescent Girls Initiative for Learning and Empowerment and the Nigeria for Women Programme Scale-Up. These will not be essentially meaningless initiatives. Healthcare, schooling, irrigation, electrical energy and ladies’s financial empowerment are reliable improvement priorities. Some have identifiable beneficiaries and measurable aims.
The concern, nonetheless, is whether or not the federal government is demonstrating sufficiently clear, publicly accessible proof of implementation, measurable outcomes, impartial analysis and long-term monetary returns commensurate with the debt commitments.

For instance, when a authorities borrows a whole lot of hundreds of thousands of {dollars} for human capital improvement, Nigerians ought to be capable to establish the variety of colleges improved, the variety of healthcare amenities strengthened, the standard of companies delivered and the measurable enchancment in instructional and well being outcomes.
When a whole lot of hundreds of thousands are borrowed for energy and irrigation, the general public ought to know the precise infrastructure delivered, the extra electrical energy generated, the hectares of land introduced underneath irrigation and the financial worth created. When loans are tied to broad coverage aims reminiscent of financial stabilisation, income mobilisation, governance enchancment and social safety, the federal government should clarify exactly what has modified on account of the financing and the way these adjustments will generate lasting financial advantages.

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The challenge isn’t that these aims are inherently obscure or pointless. The challenge is that broad coverage aims should not turn out to be substitutes for clear accounting and measurable improvement outcomes. Nigeria can’t afford to borrow billions of {dollars} and go away residents struggling to ascertain what tangible financial worth the nation has acquired in return.
There is a further concern with policy-based financing: some loans help reforms and budgetary programmes somewhat than immediately financing a revenue-generating bodily asset. Such financing could also be justified, but it surely requires significantly robust proof that the reforms will enhance fiscal capability and ship lasting public advantages. The final take a look at is easy: will these loans go away Nigeria with a stronger economic system able to repaying them, or will they merely enhance the nation’s future obligations?

The classes from nations that borrowed past their capability

Nigeria is actually not the primary nation to face the results of extreme borrowing, weak income mobilisation and poor debt administration. The experiences of Sri Lanka, Ghana and Zambia present vital classes.

In April 2022, Sri Lanka defaulted on its exterior debt obligations for the primary time in its historical past. The disaster didn’t occur in a single day. Years of fiscal deficits, a slim income base, heavy reliance on exterior borrowing and weaknesses in financial administration had left the nation susceptible. The COVID-19 pandemic devastated tourism receipts, whereas falling foreign-exchange earnings and rising import prices intensified the nation’s difficulties.

Sri Lanka finally skilled extreme shortages of important items, gas and medicines, inflation and widespread public protests. It needed to search IMF help and negotiate debt restructuring with its collectors. The lesson for Nigeria is that overseas borrowing turns into significantly harmful when a rustic lacks enough foreign-exchange reserves and a diversified export base to face up to exterior shocks.

Ghana provides an much more related African instance. For years, Ghana accessed worldwide capital markets, amassed public debt and struggled with fiscal deficits. The COVID-19 pandemic and the worldwide financial shocks that adopted additional weakened its funds. By December 2022, the Ghanaian authorities introduced a suspension of funds on sure exterior money owed and launched into a serious debt restructuring programme.

According to IMF assessments, Ghana’s debt-service-to-revenue ratio reached roughly 127 per cent in 2020. This meant that its debt-service obligations have been equal to greater than the federal government’s income for that yr, though the indicator consists of debt-service elements and should be understood in its fiscal context. The penalties have been extreme. Ghana restructured home debt, negotiated with exterior collectors and entered an IMF-supported programme. The expertise demonstrates {that a} nation can attain a degree the place its authorities income is inadequate to comfortably meet debt obligations and finance important public expenditure.

Zambia’s expertise is one other vital warning. The nation launched into an formidable public funding programme, financed considerably by means of exterior borrowing, together with non-concessional loans. However, in keeping with the IMF, the ensuing investments didn’t produce enough financial progress and authorities income to maintain the rising debt burden.
By the top of 2019, Zambia’s public and publicly assured debt had risen to roughly 105 per cent of GDP, in keeping with the IMF’s subsequent evaluation. In November 2020, Zambia defaulted on its Eurobond obligations, turning into the primary African nation to default through the COVID-19 disaster. The nation subsequently entered a protracted debt restructuring course of.
The lesson is evident: borrowing for infrastructure isn’t robotically productive borrowing. Roads, bridges, energy initiatives and different infrastructure should be correctly chosen, economically viable, effectively executed and able to producing advantages that justify their value. A rustic can borrow billions to construct infrastructure and nonetheless find yourself in monetary misery if the investments fail to supply enough financial returns.

These examples will not be predictions of Nigeria’s inevitable future. They show the dangers that come up when debt accumulation, weak fiscal capability, foreign-exchange vulnerability and poor funding returns mix.

The hazard of borrowing to repay borrowing
One of essentially the most disturbing developments in debt administration is the potential of coming into a cycle during which new loans are contracted to satisfy obligations arising from earlier loans. Borrowing to refinance maturing debt isn’t robotically irresponsible. Governments routinely refinance debt to handle maturities and scale back financing prices.

However, when refinancing turns into a everlasting substitute for income era, financial productiveness and financial self-discipline, the nation turns into more and more uncovered to creditor confidence and worldwide monetary circumstances. The hazard is {that a} authorities might discover itself borrowing to not construct new financial capability, however merely to stay financially afloat. This is especially worrying for Nigeria due to its huge improvement wants.

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We have hundreds of thousands of kids who require high quality schooling, hospitals that want trendy gear, roads that require rehabilitation, farmers who want irrigation and processing amenities, and industries that want dependable electrical energy. Every naira dedicated to debt servicing is a naira that can’t concurrently be spent on these priorities. The alternative value is big. What occurs when the collectors start to dictate the tempo?

There can also be a political and financial dimension to overseas indebtedness that Nigerians should perceive. When a rustic turns into closely depending on exterior financing, its financial coverage selections can turn out to be more and more constrained by the circumstances connected to financing and the necessity to keep creditor confidence.

This doesn’t imply each World Bank or IMF mortgage robotically comes with dangerous circumstances. Different amenities have completely different phrases, and a few are designed to help reforms that governments have independently chosen. However, policy-based loans can contain agreed reform commitments, efficiency circumstances and institutional adjustments. Nigeria’s personal expertise with subsidy elimination and exchange-rate liberalisation has demonstrated how main financial coverage selections can have far-reaching social penalties.
The authorities should subsequently be clear concerning the circumstances connected to loans, the obligations being undertaken and the long-term implications for the Nigerian economic system. Financial independence isn’t merely about having a sovereign flag and an elected authorities. It additionally requires enough fiscal and financial capability to make coverage selections with out being trapped by an unsustainable debt burden.

What Nigeria should do earlier than the issue turns into larger

The answer is to not cease borrowing altogether. That can be an unrealistic and doubtlessly counterproductive place for a creating nation with substantial infrastructure and human improvement wants. The answer is to borrow extra intelligently, spend extra transparently and construct a stronger productive economic system.

Firstly, each main mortgage needs to be accompanied by a publicly accessible financial justification, a transparent implementation timetable and measurable efficiency indicators.

Secondly, the federal government should prioritise investments that broaden home manufacturing, significantly in manufacturing, agriculture, power, mineral processing and export-oriented industries.

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Thirdly, Nigeria should strengthen its non-oil income base. A rustic with an economic system of Nigeria’s measurement mustn’t proceed to rely so closely on a comparatively slim pool of presidency income.

Fourthly, foreign-currency borrowing should be fastidiously managed in opposition to the nation’s capability to earn overseas alternate. Loans needs to be structured with due consideration for exchange-rate dangers, reimbursement schedules and the financial returns of the initiatives being financed. Fifth, there should be stronger legislative oversight and impartial auditing of mortgage utilisation. Nigerians need to know the way a lot has been borrowed, how a lot has been disbursed, what has been delivered and what stays excellent.

Finally, authorities should distinguish between borrowing for productive funding and borrowing to finance recurrent expenditure or momentary fiscal aid. The latter might typically be mandatory, but it surely can’t turn out to be a everlasting improvement technique.

Saheed Fuhad is a Broadcast Journalist. Public Affairs Analyst. He is at the moment the Head of Station at Mainland 98.3fm. He writes from Lagos.

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