Nigeria’s public debt has recently hit a record high, soaring to N142 trillion, largely attributed to the economic policies of President Bola Tinubu’s administration. This sharp increase in the country’s external and domestic borrowing is due to a combination of factors, including the government’s ambitious infrastructure projects, economic recovery plans post-pandemic, and the ongoing need to service previous debt obligations. However, the large-scale borrowing has raised concerns among economic analysts, critics, and citizens, who fear that the rising debt could severely undermine the nation’s long-term fiscal sustainability.
The Escalating Public Debt
As of the latest figures released by the Debt Management Office (DMO), Nigeria’s public debt has grown significantly, with the total outstanding debt surpassing N142 trillion. This surge in debt is largely attributed to the administration’s decision to take on more loans to fund key developmental projects, stimulate economic recovery, and stabilize government finances in the face of dwindling revenues from oil. Under President Tinubu’s leadership, the government has sought to address immediate budgetary deficits, coupled with a pressing need to finance infrastructure, social welfare, and other development projects critical for the country’s growth.
The Nigerian government has consistently faced budgetary challenges, mainly due to the volatility of global oil prices, which is the primary source of foreign exchange and revenue for the country. The oil price fluctuations over the past few years, exacerbated by global economic disruptions such as the COVID-19 pandemic, have left Nigeria grappling with significant revenue shortfalls. Consequently, the administration has turned to domestic and international borrowing to bridge the gap.
Tinubu’s Economic Policy and Borrowing Strategy
President Bola Tinubu, who assumed office in May 2023, inherited an economy burdened with high debt, inflation, and unemployment. With his administration’s focus on economic reform and growth, Tinubu introduced several measures aimed at stimulating the economy, including tax reforms, the removal of fuel subsidies, and plans to bolster the country’s infrastructure.
However, these policies also came with the necessity for increased borrowing. While these loans are ostensibly for the development of critical sectors such as energy, transportation, and technology, they have raised alarms over the country’s rising debt profile. Critics argue that Nigeria’s debt trajectory is unsustainable, especially with the rising costs of debt servicing, which now consume a significant portion of government revenue.
One of the key contributors to the growing public debt has been the issuance of Eurobonds and other external debt instruments in foreign currencies. The country’s foreign debt, which constitutes a substantial portion of Nigeria’s total debt, is highly susceptible to exchange rate fluctuations. As the value of the Naira continues to decline, the servicing of these foreign-denominated debts has become increasingly expensive, further compounding the financial pressures on the government.
Debt Servicing and Fiscal Challenges
A critical issue that has emerged with the increase in Nigeria’s debt is the country’s capacity to service it. The debt servicing obligations now consume a large proportion of Nigeria’s revenue, leaving limited funds available for essential government programs and public services. The latest reports indicate that over 90% of the government’s income is directed toward servicing existing debt, leading to a significant reduction in the funds available for other vital sectors such as healthcare, education, and security.
This situation is compounded by the fact that Nigeria’s revenue generation mechanisms remain inadequate to support the growing fiscal burden. The tax-to-GDP ratio in Nigeria is one of the lowest in the world, with many individuals and corporations evading tax payments. Furthermore, the country’s reliance on oil as the main revenue source is a major vulnerability, as oil price volatility continues to affect government income.
The Impact on Economic Growth and Development
While the loans taken by the government are primarily intended to finance long-term infrastructure projects that could potentially stimulate economic growth, there is a growing concern about the immediate impact of the rising debt burden on the country’s economy. Economic experts argue that Nigeria risks falling into a vicious cycle of debt dependence, where increasing borrowing leads to higher debt servicing obligations, which in turn limits the government’s ability to invest in development programs.
In addition, the increased debt burden has led to inflationary pressures, as the Central Bank of Nigeria (CBN) has resorted to monetizing some of the debt through printing more money to finance government activities. This has triggered higher inflation rates, devaluation of the Naira, and rising costs of living for Nigerians. Consequently, many Nigerians are facing the double challenge of increased taxation and reduced purchasing power, which is exacerbating the poverty rate.
The Way Forward: Sustainable Debt Management
To address the growing public debt, experts suggest that Nigeria needs to adopt a more sustainable approach to managing its finances. This includes diversifying the economy away from oil dependence, improving tax collection, and ensuring that borrowed funds are effectively utilized for projects that generate long-term economic returns. Moreover, there is a need for greater transparency in government borrowing and debt management practices.
Nigeria’s debt crisis is not solely the result of President Tinubu’s administration, but rather the culmination of years of fiscal mismanagement, oil price fluctuations, and global economic instability. Nonetheless, the responsibility now lies with the government to implement reforms that will reduce the country’s dependence on borrowing while ensuring that the nation’s infrastructure needs are met without jeopardizing long-term fiscal health.
Conclusion
The N142 trillion public debt is a stark reminder of Nigeria’s mounting fiscal challenges under President Bola Tinubu’s administration. While borrowing is often necessary for financing developmental projects, the rapid accumulation of debt and its associated costs pose significant risks to the country’s economic future. As Nigeria grapples with these challenges, the government must prioritize fiscal discipline, revenue diversification, and debt management reforms to prevent a debt crisis that could undermine the country’s economic stability and growth prospects.