Nigeria is at a critical juncture. The Tinubu administration’s recent proposal to secure an additional ₦45 trillion (approximately $24 billion) in foreign loans, outlined in the 2025 budget, has provoked a fierce debate that directly challenges the nation’s economic future.
While officials justify this colossal borrowing as essential for infrastructure, healthcare, and other vital sectors, the mounting debt and opaque utilisation of past funds paint a worrying picture. Our government must re-evaluate its approach, prioritising sustainable revenue generation and stringent fiscal discipline over a dangerous reliance on external borrowing.
The government’s argument that these funds are necessary to bridge infrastructure gaps and compensate for dwindling local funding, while seemingly logical, overlooks a fundamental flaw: the consistent failure to manage existing resources and borrowed funds effectively.
Past borrowing has often not translated into tangible, transformative development that generates sufficient returns to service the debt.
As Professor Simeon Nnah rightly points out, a lack of detailed plans for the borrowed funds, coupled with concerns about spending on non-productive ventures, undermines not only public trust but also investor confidence.
When debt servicing already consumes a disproportionate share of the budget, eclipsing allocations to critical sectors like education and health, simply adding more debt without a robust, transparent, and self-sustaining deployment strategy is akin to digging a deeper hole.
What should the government have done differently? Instead of perpetually seeking external loans to fund recurrent expenditures and projects with unclear returns, the focus should have been on aggressive, comprehensive, and equitable domestic revenue mobilisation.
This includes broadening the tax base and improving collection efficiency. Nigeria’s tax-to-GDP ratio remains notoriously low. Rather than simply increasing existing taxes that burden the already struggling populace, the government should have focused on bringing more informal sector businesses into the tax net, streamlining collection processes, and vigorously combating tax evasion. This would provide a more stable and sustainable revenue stream, reducing the need for foreign debt.
Furthermore, curbing wasteful and inflated spending is non-negotiable. As highlighted by Seun Onigbinde, instances of inflated budgets for non-essential projects persist.
The government should have, from day one, implemented radical austerity measures across all levels of government, cutting down on excessive perks, unnecessary travel, and redundant agencies. This would not only free up substantial funds but also signal a commitment to fiscal responsibility, which is crucial for building trust with both citizens and potential lenders.
Any borrowing, if necessary, should be rigorously tied to projects that are self-financing or directly generate foreign exchange. Investing in refining capacity, for instance, as Temitope Kolade suggests, would mean Nigeria benefits from its crude, reduces costly refined product imports, and saves valuable foreign exchange. This contrasts sharply with borrowing for projects that become white elephants or contribute little to economic growth.
Strengthening anti-corruption mechanisms and accountability is also paramount. A major deterrent to both domestic and foreign investment and a drain on public funds is corruption. Beyond rhetoric, concrete steps should have been taken to ensure that every naira borrowed or generated is accounted for and utilised for its intended purpose.
Stricter oversight, transparent procurement processes, and swift prosecution of corrupt officials would instil confidence and ensure resources are not siphoned off.
Finally, accelerating economic diversification beyond oil is crucial. While efforts are being made to diversify revenue, the pace needs to be accelerated.
Over-reliance on oil makes Nigeria vulnerable to global price fluctuations, directly impacting its ability to defend the Naira and service debt. Investing heavily in agriculture, manufacturing, and technology, supported by policies that encourage private sector growth, would build a more resilient economy capable of generating its wealth.
The current strategy, as Atiku Abubakar warns, risks turning Nigeria into a “financial scheme” where new debts are taken to pay off old ones. With public debt surging and projections reaching over ₦182 trillion by 2026, long-term sustainability is gravely jeopardised.
The depreciation of the Naira further exacerbates the problem, making foreign-denominated debt more expensive to service in local currency.
While Dr. Tope Fasua attempts to rationalise the borrowing, highlighting a multi-year ceiling and improved debt-to-GDP ratios, these metrics do not negate the fundamental concern: is Nigeria borrowing to grow or borrowing to simply sustain an unsustainable model?
The National Assembly must exercise extreme rigour in scrutinising this loan proposal. It is not merely about approving funds but about demanding detailed, transparent plans, ensuring accountability, and pushing for a paradigm shift towards fiscal prudence.
Nigeria’s future depends on it. We must move beyond the allure of quick foreign cash and commit to building a productive, self-reliant economy through responsible governance and judicious use of our vast domestic potential. The alternative is a debt crisis that could cripple generations to come.
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