Chris Okpoko
In recent years, Nigeria’s economic landscape has been marred by escalating debt levels, raising concerns over the sustainability of its financial practices. The country’s domestic debt profile now stands at ₦79.90 trillion, following the Senate’s approval for President Bola Tinubu to secure an additional loan of ₦1.15 trillion from the domestic debt market.
The loan is intended to partially finance the ₦14.10 trillion deficit in the 2025 national budget, as part of the government’s efforts to sustain ongoing economic and infrastructure programs. The upper chamber gave its approval after adopting the report of the Senate Committee on Local and Foreign Debt, which reviewed the President’s request. The Chairman explained that the 2025 Appropriation Act provides for a total expenditure of ₦59.99 trillion, representing an upward review of ₦5.25 trillion from the ₦54.74 trillion initially proposed by the Executive. The committee further noted that the increase in spending widened the budget deficit to ₦14.10 trillion, out of which ₦12.95 trillion had previously been approved for borrowing.
The newly approved ₦1.15 trillion domestic loan, therefore, seeks to bridge the remaining funding gap. According to the Debt Management Office (DMO), Nigeria’s domestic debt stood at ₦78.75 trillion as of the end of the first quarter of 2025. This borrowing spree paints a troubling picture of a nation caught in a debt trap, where the immediate benefits of borrowing overshadow the potential long-term consequences for the economy and society.
At the core of Nigeria’s borrowing spree is the effort to cover a budget deficit that has worsened due to declining oil revenues, the country’s main source of income. Global price fluctuations, combined with domestic issues such as insecurity and corruption, have significantly affected oil production and exports. As a result, the government has turned to domestic borrowing to alleviate its financial woes, inadvertently entrenching itself in a cycle of indebtedness. While such measures may provide a temporary fiscal cushion, they obscure the deeper implications of rising debt levels on Nigeria’s economy.
One of the hidden costs of Nigeria’s increasing debt is the burden of interest payments. As debt levels rise, so do the costs associated with servicing that debt. Presently, a significant portion of Nigeria’s government revenue is allocated to interest payments on existing loans rather than funding critical development projects or social services. This misallocation of resources stifles growth and limits the government’s ability to invest in essential infrastructure such as roads, healthcare, and education. Consequently, citizens may find themselves facing deteriorating public services and infrastructure, diminishing their quality of life amidst a growing financial crisis.
Moreover, the reliance on domestic borrowing can crowd out private investment. When the government issues new debt, it competes directly with private companies for available funds in the financial market. Higher demand for capital often leads to increased interest rates, making it more expensive for businesses to borrow. In a country already grappling with high unemployment rates, this situation can be particularly detrimental. Businesses may curtail expansion plans or delay hiring due to higher financing costs, further exacerbating economic stagnation and limiting job creation.
Additionally, the risks associated with excessive borrowing extend to the finances of individual Nigerians. As the government increases its debt load, it may seek to raise taxes or impose austerity measures to manage its financial obligations. Such actions can lead to greater economic hardship for the average citizen, particularly in a nation where many already struggle to make ends meet. Increased taxation may disproportionately affect low and middle-income families, pushing them further into poverty. Additionally, cuts to vital public services stemming from debt repayment could heighten social tensions and lead to civil unrest.
Another dimension of Nigeria’s borrowing spree is the potential impact on its credit rating. As the country amasses a substantial debt burden, credit rating agencies may downgrade Nigeria’s rating, indicating a higher risk to investors. A lower credit rating can lead to increased borrowing costs, further complicating the nation’s financial predicament. Investors may flee, seeking safer opportunities elsewhere, which would diminish foreign direct investment and restrict access to international capital markets. This situation could intensify the economic crisis, continuing the cycle of borrowing to stabilize the economy.
Beyond its immediate financial implications, Nigeria’s burgeoning debt crisis poses existential questions about governance and accountability. The process through which loans are approved and disbursed has often been marred by a lack of transparency, raising concerns over corruption and mismanagement. Without stringent checks and balances, public funds can be diverted away from intended purposes, leaving critical projects unfunded while increasing the debt burden. Citizens have a right to demand accountability and transparency in how their government manages public finances, but the prevailing environment of mistrust can obstruct necessary reforms.
The current borrowing spree also highlights the importance of economic diversification. Nigeria’s over-reliance on oil leaves it vulnerable not only to international price fluctuations but also to global shifts toward renewable energy sources. To create a more sustainable economic environment, the country must invest in diversifying its economic base, fostering industries such as agriculture, technology, and manufacturing. By reducing its dependence on oil revenues, Nigeria can mitigate the need for excessive borrowing, paving the way for a more resilient economic future.
To address these challenges, Nigeria must implement a more responsible fiscal policy framework that emphasizes discipline, transparency, and accountability. Policymakers should focus on generating revenue through comprehensive tax reforms, improving tax collection efficiency, and minimizing wastage of public resources. These efforts would enable the government to reduce its dependence on debt and allocate funds more effectively towards pressing national priorities.
Engaging with stakeholders in civil society, academia, and the private sector can also foster better governance and financial management. Public discourse around the implications of borrowing can promote awareness and encourage civic engagement, leading to more informed decision-making. Ultimately, creating a debt strategy that incorporates not only financial considerations but also social and economic goals will be key to breaking the cycle of dependency and establishing a culture of fiscal prudence.
In conclusion, Nigeria’s current borrowing spree represents a critical moment in its economic history, fraught with both opportunities and risks. The rising domestic debt level, currently at ₦79.90 trillion, indicates an urgent need to address the underlying structural issues driving this trend. While borrowing may offer short-term relief, the long-term consequences—ranging from reduced public investment to increased poverty and social unrest—must not be ignored. By adopting a comprehensive, results-oriented approach to fiscal management and broadening its economic base, Nigeria can strive for sustainable growth that centers on people’s welfare. Without careful navigation, the country risks deepening its debt trap, jeopardizing its collective future in a rapidly changing world.