Experts Warn Nigeria’s Rising Debt Risks Fiscal Instability
By OBIOMA TORI
NIGERIA’S growing reliance on debt has sparked renewed warnings from economists, policy experts, and civil society groups, who caution that without structural reforms and transparency, the nation risks long-term fiscal instability.
The Senate recently approved a ₦1.15 trillion domestic loan to help fund the 2025 budget deficit, highlighting the government’s dependence on borrowing to cover revenue shortfalls and pressing development needs. With total public debt surpassing ₦152 trillion by mid-2025, questions mount over whether loans are financing productive investments or merely servicing recurring obligations.
Civil society groups, including BudgIT Foundation and the Centre for Social Justice, have called for stricter accountability in loan management. BudgIT stressed that borrowing must be tied to measurable outcomes, warning that the cycle of taking new loans to pay old debts is unsustainable. Citizens express frustration as successive borrowing has yet to yield significant improvements in infrastructure, power supply, healthcare, or education.
The root of Nigeria’s fiscal challenge remains revenue shortfalls. Oil revenues are volatile due to price swings, theft, and production issues, while non-oil revenues remain insufficient. Debt servicing already consumes over 60 percent of government revenue, leaving minimal funds for capital projects. Johnson Chukwu, Managing Director of Cowry Asset Management, warned that borrowing for consumption rather than productive investment perpetuates fiscal stress.
Experts caution that continued borrowing without reforms risks trapping Nigeria in a cycle of debt. Dr. Muda Yusuf of the Centre for the Promotion of Private Enterprise argued that boosting tax efficiency, expanding exports, and reducing leakages are critical to avoid reliance on loans for routine expenditure. Dr. Ayo Teriba of Economic Associates added that rising inflation and exchange rate volatility amplify fiscal vulnerabilities.
The government maintains that its borrowing is strategic, aimed at funding infrastructure, social programs, and reforms. Finance Minister Wale Edun insists that the loans are within sustainable limits and support the administration’s Renewed Hope Agenda. Yet, watchdogs question whether implementation capacity and political will are sufficient to translate borrowed funds into tangible growth.
Analysts warn that continued delays in reform, combined with rising global interest rates and a weakened naira, could exacerbate debt service costs, strain reserves, and force further economic adjustments, including potential subsidy reinstatements or currency devaluation. Without decisive action, Nigeria may face a deepening fiscal crisis despite its current borrowing strategy.
