In the early months of 2025, Nigeria’s public debt had quietly climbed to a staggering $400 billion, eclipsing two‑thirds of the country’s projected Gross Domestic Product (GDP). The heavy‑handed borrowing trend – amplified by a choked oil sector and a flurry of colossal infrastructure proposals – threatens to plunge the nation into a debt trap that could cripple economic growth, erode public services, and harden domestic inequalities.
A runaway debt trajectory Official figures released in June by the Ministry of Finance show that Nigeria’s external debt—primarily denominated in U.S. dollars—has surged from $240 billion in 2020 to $300 billion in 2023. Domestic borrowing has risen in tandem, with newly issued bonds making up roughly 30 % of the total debt portfolio. The World Bank’s 2024 “Doing Business” report places Nigeria at 142nd out of 190 economies on credit risk, underscoring the fragile finance environment. Experts attribute the rapid ascent to several key drivers: | Driver | Year‑to‑Year Increase (USD billions) | Oil‑price‑flash‑yields | +12 | | Fiscal deficit financing | +9 | | Infrastructure bonds issuance | +8 | | High‑yield sovereign loans | +6 | “The debt kinetics are unsustainable,” says Dr. Nneka Ojiaku, an economic researcher at the Lagos Institute for Policy Studies. “What we’re seeing is a borrowing pattern that overreaches fiscal capacity and lacks a clear, evidence‑based repayment plan.”
The cost of reckless fiscal imagination **1. Inflationary spiral** Government borrowing has been financed in large part through monetary expansion. The Central Bank’s open‑market operations have tripled the money supply since 2019, pushing core inflation to 14 % and pushing interest rates to the 18‑year high of 17 %. 2. Siphoned tax base Tax receipts have been steadily declining because of a tax‑reform movement that prioritised “main‑street economic growth” over a robust revenue framework. In 2024, tax collection fell by 4 % ahead of the fiscal year, leaving the government with a narrower margin to service debt. **3. Worsening public finances** With public debt servicing costs climbing beyond 6 % of GDP, the government has had to divert up to 25 % of the national budget away from infrastructure and basic services—health, education, and social protection—crushing long‑term growth potential.
The reckless grab for “mega‑projects” In 2022, the Military‑led Ministry of Finance announced the “Nation‑Wide Infrastructure Revival Initiative” (NWIRI), a $140 billion package that promised new highways, a high‑speed rail corridor, and a pan‑African energy corridor. Funding was to be sourced from a mix of sovereign bonds, multilateral institutions, and a controversial “Public‑Private Partnership” (PPP) model that incentivised private operators with tax breaks and land grants. Analysts warn that NWIRI’s deliverables exceed Nigeria’s current fiscal capacity. “The catch‑22 lies in assuming that future tariff revenues from a new national water supply can repay the debt before the next oil price correction hits,” warns Professor Ajani Kuato of the University of Ibadan’s Finance Department. Investor sentiment and geopolitical risks Foreign investors have taken notice. The African Development Bank’s recent easing of concessional loan terms—raising their cost of capital to 5.4 % from 2.6 %—signals a tightening of global credit appetite. In international forums, the U.S. Treasury’s “International Monetary Fund (IMF) 2025 Financial Stability Review” highlights Nigeria’s “overreliance on external fuel for growth” and advises “mandatory restructuring of sovereign debt using a mix of yield‑matching and Treasury bond swizzles.”
What can be done? 1. Fiscal consolidation The government must slash superfluous spending projects by 18 % over the next four years and commit to a transparent body that oversees projects until they deliver measurable outputs before more funds are disbursed. **2. Debt restructuring** Engage with the International Monetary Fund and the sovereign debt relief initiative—Merrill Lynch’s “Hold‑Back” program—to achieve a 15‑year repayment plan that sets a debt‑service ratio at or below 6 % of GDP. 3. Revenue reform Reinstate a broad congealed tax framework that includes commodity‑based taxes, digital‑economy levies, and an expanded VAT base to regain the forecasted 3.5 % growth in tax revenue. 4. Responsible borrowing Public-tender borrowing caps, a “Good Debt” framework that prohibits borrowing beyond the point of sustainability, and isolation of debt for specific infrastructure models unsupported by cost‑benefit analyses.
A clarion call to the risk‑averse “This crisis could either be an inflection point or a precipice,” says Dr. Ojiaku. “The ultimate choice is for Nigeria’s leadership to recognize that reckless borrowing is not an engine of growth but a fissure that could split the country’s economic fabric.” The bereft tunes of economic growth, the fatal over‑reliance on foreign loans, and the desperate need for a systemic overhaul mean that Nigeria’s debt crisis will not be a quiet misstep. It demands a bold re‑orientation of fiscal policy, a deeper commitment to transparency, and an urgent halt to ill‑advised borrowing that threatens to deepen a precarious macro‑economic milieu.