By Ubong Usoro
Nigeria, often touted as the “Giant of Africa,” finds itself grappling with a growing debt crisis that raises significant concerns about the future of the nation’s economy. As of 2024, Nigeria’s total public debt stands at an alarming ₦121.67 trillion ($91.46 billion), marking the highest in sub-Saharan Africa. This mounting debt includes both domestic (₦65.6 trillion) and foreign obligations (₦56 trillion), and has crossed the critical threshold of a 50% debt-to-GDP ratio, which highlights the serious financial strain the country faces.
Historically, Nigeria’s borrowing began as far back as 1923 with a £5.7 million loan from the British government. Unfortunately, what started as borrowing for development has spiraled into unsustainable debt accumulation. The post-independence era saw Nigeria increasingly rely on both domestic and international creditors, including the World Bank, IMF, and various national lenders. This pattern has continued into modern times, with loans increasingly being used to bridge budgetary deficits.
The consequences of Nigeria’s escalating debt are profound. In 2024, more than 162% of government revenue was spent on servicing debt, leaving little room for critical investments in infrastructure, education, and healthcare. Additionally, the capital expenditure needed to spur development declined by 25% in the first half of 2024, further delaying essential projects.
Causes and Challenges
Several factors have contributed to Nigeria’s growing debt burden. The primary driver has been insufficient revenue generation, coupled with high budgetary expenditures. Declining oil revenues, devaluation of the naira, and inflation have worsened the situation. Moreover, borrowing from both domestic and foreign sources has been exacerbated by high interest rates, particularly for local loans, which reached 19% in early 2024.
Despite the growth in Nigeria’s GDP, the nation struggles with weak revenue generation. Nigeria’s debt service-to-revenue ratio is one of the worst globally, limiting the government’s capacity to use its earnings for development rather than debt repayments.
Recommendations
In the face of these challenges, immediate steps are necessary. Drawing from the experience of former President Olusegun Obasanjo, Nigeria should seek debt forgiveness or negotiate better terms with creditors to alleviate the burden. Another approach is to reduce the cost of governance and limit unnecessary recurrent expenditures. Additionally, reviving national refineries could reduce reliance on expensive fuel imports, freeing up resources to repay debt.
Investing in sectors like agriculture and infrastructure would diversify the economy, reduce unemployment, and eventually enhance Nigeria’s revenue streams. Finally, better governance practices, particularly around transparency and accountability in loan utilization, would ensure funds are directed to impactful projects rather than wasted through corruption.
Though Nigeria’s debt situation appears bleak, there remains hope. A focused, strategic approach, anchored in fiscal discipline, will be key to restoring stability and growth. The nation’s leadership must muster the political will to implement these tough but necessary reforms.
