Despite repeated Federal Government’s assurances that recent borrowings are strategic and targeted at stimulating growth, a rising chorus of economists, policy experts, and civil society groups warn that the nation’s growing reliance on loans could spell long-term fiscal instability if not matched with structural reforms and transparency.
Nigeria’s debt profile is fast becoming one of the most debated issues in the country’s economic landscape following the Senate’s approval of a fresh N1.15 trillion domestic loan to fund part of the 2025 budget deficit.
The approval, granted on Wednesday, underscores the Federal Government’s increasing reliance on borrowing to bridge fiscal shortfalls amid sluggish revenue performance and mounting developmental needs.
The new loan is part of a series of recent borrowing initiatives that have stirred intense debate among economists, market analysts, and civil society groups about the country’s debt sustainability, fiscal prudence, and long-term economic stability.
With total public debt estimated at over N152 trillion as of mid- 2025, according to figures from the Debt Management Office (DMO), Nigeria’s borrowing trend has raised difficult questions: Is the country investing wisely for future prosperity, or simply mortgaging tomorrow’s stability to pay today’s bills?
Many analysts believe that the fresh approval by the National Assembly will further compound the country’s debt burden.
Public Anxiety And Civil Society Push- Back
The anxiety over Nigeria’s rising debt has become more pronounced as citizens and watchdog groups question the prudence and transparency of government borrowing.
Groups such as BudgIT Foundation and the Centre for Social Justice (CSJ) have been at the forefront of the public debate, calling for better accountability in loan management and stronger efforts to grow domestic revenues.
In a recent statement, BudgIT cautioned that the current borrowing pattern was unsustainable. “Borrowing must be tied to measurable outcomes and project deliverables,” the organisation said. “The pattern of incurring new debts to refinance old obligations without visible growth outcomes is unsustainable.”
This statement captures the growing frustration among many Nigerians who feel that successive borrowing cycles have not translated into meaningful improvements in infrastructure, job creation, or living standards.
“Every year we hear about new loans, but the roads are still bad, power supply is erratic, and education and healthcare systems remain underfunded,” said Ene Obi, a civil society advocate based in Abuja. “People are beginning to ask: where is all this money going?”
The Fragile Fiscal Picture
Nigeria’s fiscal challenge is rooted in a simple but persistent problem—revenue shortfall. The government continues to spend more than it earns, forcing it to borrow heavily to fill the gap.
Oil, which remains the mainstay of government revenue, has become increasingly unreliable due to price volatility, theft, and production disruptions. Meanwhile, non-oil revenues, despite modest gains, still fall short of expectations.
According to the budget office data, debt servicing consumed more than 60 percent of Nigeria’s total revenue in the first half of 2025, leaving little room for capital investments.
Johnson Chukwu, Managing Director of Cowry Asset Management, noted that while borrowing to fund productive projects could stimulate growth, Nigeria’s current debt profile reflects more of consumption spending.
“The real issue is not the volume of debt but how it is used,” Chukwu explained. “If loans are used for infrastructure, education, or energy that can generate returns, then they can be justified. But when debts are used to pay salaries or fund inefficiencies, they create a cycle of dependency and fiscal stress.”
Analysts Warn Of a Debt Trap
Experts warn that if the government fails to introduce deep structural reforms, the country could slide into a debt trap—a situation where borrowed funds are used mainly to pay existing obligations, leaving little for productive investment.
“Borrowing should be complemented with reforms that boost tax efficiency, expand exports, and reduce leakages,” said Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE). “We can’t continue to borrow to fund consumption or inefficiencies in the public sector.”
Yusuf emphasised that while borrowing is a legitimate fiscal tool, it should not become a substitute for sustainable revenue generation. “What Nigeria needs now is a balance between fiscal responsibility and economic stimulus. Borrowing can build a nation, but only if it’s properly channelled.”
Similarly, Dr. Ayo Teriba, CEO of Economic Associates, noted that the growing debt service burden is putting pressure on the naira and public finances. “With exchange rate volatility and inflation above 20 percent, every new loan adds to the vulnerability of the fiscal system,” he said.
Government’s Position
The Federal Government has consistently defended its borrowing strategy, arguing that loans are essential to drive infrastructure, social welfare, and reform programmes necessary for long-term economic transformation.
Finance and Economy Minister, Wale Edun, recently reiterated that current borrowings were well within sustainable limits and aligned with Nigeria’s debt management framework.
According to him, the funds are being used to support key projects in health, education, transportation, and power—areas critical to achieving the administration’s Renewed Hope Agenda and positioning Nigeria for future competitiveness.
“The focus is on value-driven borrowing,” Edun said. “We are not borrowing for consumption; we are borrowing to build a foundation for inclusive growth.”
However, the challenge remains in ensuring that the borrowed funds are effectively monitored and yield tangible results—a concern that watchdogs and analysts say has been Nigeria’s Achilles heel for decades.
Analysts are sceptical about the pace of implementation. “Nigeria has had ambitious reform blueprints for years, but the problem has always been execution,” said Professor Ken Ife, a development economist. “The capacity of institutions to deliver and the political will to enforce tough reforms will determine whether we turn the corner or sink deeper.”
Concerned Nigerians believe that the longer Nigeria delays reform, the higher the risk of debt distress, considering global interest rates are rising and the naira is under pressure. They said the cost of servicing both domestic and external loans continues to climb.
Nigeria’s debt servicing costs rose by nearly 35 percent year-on-year in 2025, largely due to the depreciation of the naira and the repricing of Eurobond obligations.
Some experts warn that further devaluation or subsidy reinstatements might become unavoidable if fiscal buffers continue to weaken. “The country’s external reserves are under pressure, and if we don’t improve revenue, we’ll face liquidity challenges in meeting debt obligations,” Chukwu cautioned.
SOURCE: Independent
