NIGERIA’S DEBT: A NATION LIVING ON BORROWED TIME

Nigeria’s debt profile has become one of the most consequential issues shaping the country’s economic future, with debt servicing consuming a significant portion of government revenue and borrowing increasingly used to fund recurrent expenditure rather than capital investment.

The Nigeria debt profile borrowing future debate has taken on renewed urgency as the Tinubu administration defends its fiscal policies amid rising hardship and calls for increased spending.

THE NUMBERS

Nigeria’s total public debt stock stood at approximately ₦134 trillion as of mid-2026, according to figures from the Debt Management Office.

This includes both domestic and external debt, with domestic debt accounting for the larger share.

Debt servicing has risen sharply in recent years, driven by higher interest rates, exchange rate depreciation and increased borrowing.

In the 2026 budget, debt servicing was projected to consume a significant portion of retained revenue, leaving limited fiscal space for capital expenditure and social programmes.

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THE BORROWING HABIT

Nigeria has borrowed consistently over the past decade, across successive administrations.

The justification for borrowing has varied: to fund infrastructure, to bridge budget deficits, to respond to economic shocks and, increasingly, to service existing debt.

Critics argue that the country has fallen into a debt trap, where new borrowing is used to pay off old debt rather than to finance productive investment.

The government insists that its debt is sustainable and that borrowing is necessary to fund development.

THE COMPOSITION OF DEBT

Nigeria’s debt is composed of both domestic and external obligations.

Domestic debt, largely in the form of bonds and treasury bills, is owed to Nigerian institutions and individuals. External debt is owed to multilateral institutions, bilateral creditors and commercial lenders.

The composition matters because domestic debt is denominated in naira while external debt is denominated in foreign currency.

Exchange rate depreciation increases the naira value of external debt, making it more expensive to service.

THE DEBT SERVICING BURDEN

Debt servicing has become a major fiscal challenge. In recent years, debt service has consumed a substantial share of government revenue, sometimes exceeding capital expenditure.

This means that the government is spending more on paying interest and principal than on building roads, hospitals and schools.

The consequence is a crowding-out effect: resources that could be used for development are diverted to debt service.

THE SAP PARALLEL

The current debt situation echoes the crisis that led to the Structural Adjustment Programme in 1986.

In the early 1980s, Nigeria’s external debt became unsustainable as oil prices collapsed.

The government turned to the IMF and World Bank for support, and SAP was the condition. SAP prescribed devaluation, subsidy removal, privatisation and fiscal austerity.

The programme was implemented, but the debt burden persisted. In 2005, Nigeria secured debt relief from the Paris Club, which wrote off a significant portion of its external debt.

For a time, the debt burden eased.

But borrowing resumed, and the debt stock has grown steadily since.

THE LESSONS

The lesson from SAP and its aftermath is that borrowing is not inherently bad. Debt can be a tool for development if it is used to finance productive investment that generates returns sufficient to service the debt.

The problem arises when borrowing is used to fund consumption, when projects are poorly chosen or executed, and when the terms of borrowing are unfavourable.

Nigeria’s challenge is to ensure that future borrowing is directed toward productive investment, that debt is managed sustainably, and that the burden does not fall disproportionately on future generations.

WHY IT MATTERS

For Nigerians, the debt profile is not an abstract issue. It determines how much the government can spend on health, education, infrastructure and social protection.

When debt service consumes a large share of revenue, less is available for the things that improve people’s lives.

The debate over debt is ultimately a debate about priorities: what the government spends on, and who pays for it.

ValidViewNetwork reports that Nigeria’s debt profile remains a central challenge for the Tinubu administration. The choices made today will shape the country’s future for decades.