When the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, warned that Nigeria must “reduce our dependence on debt,” he set for himself a test of competence, courage and resolve. His assessment would be laid bare by the numbers in the coming months.
Yet, Edun is right in sounding the alarm. In an era of hostile global finance, shrinking multilateral support and punishing interest rates, debt is no longer a convenient way to fund development; the risk of entrapment is much higher.
“We need to reduce our dependence on debt. And so, revenue mobilisation within this context is a developmental imperative,” Edun said at the February management retreat of the Nigerian Revenue Service.
Grim global numbers reinforce his argument. In 2024 alone, developing countries paid about $163 billion in debt service, compared with just $42 billion in overseas development assistance and $97 billion in foreign direct investment.
The balance has turned decisively against countries like Nigeria. Borrowing more in such conditions is not a strategy; it is a perilous drift toward a fiscal precipice.
Nigeria’s debt trajectory over the past decade has been sobering.
While it took eight years for Muhammadu Buhari’s administration to move Nigeria’s debt profile from N42 trillion to N77 trillion, the Bola Tinubu administration doubled that figure in less than two years, as public debt has ballooned to about N152.39 trillion by June 2025, with projections pointing to nearly N188 trillion by the end of that year.
While access to concessional loans can be a critical financial lever for development, the growing reliance on external debt amid a rising debt profile raises concerns about debt sustainability, repayment capacity, and whether these borrowings are genuinely serving their intended purpose.
Between January and July 2025, the debt-to-revenue ratio was 71.8 per cent, with N9.8 trillion debt servicing compared with N13.76 trillion revenues, forcing the government to borrow simply to pay interest. That is the textbook definition of a vicious cycle.
Chronic revenue weakness remains central to the country’s rising debt profile. Nigeria’s revenue-to-GDP ratio is under 10 per cent, below the sub-Saharan average of 15 per cent. Oil, still the fiscal backbone, is volatile and undermined by theft, vandalism and underinvestment.
Nigeria finds it difficult to meet its OPEC quota of 1.5 million barrels per day. In 2025, the country produced about 1.6 m bpd. Due to international oil market vagaries, oil prices were below the 2025 budget benchmark of $75 per barrel and the target of 2.06 m bpd.
Persistent budget deficits mean borrowing has become the norm rather than the exception.
The securitisation of roughly N30 trillion in Central Bank “Ways and Means” advances merely formalised what had long been fiscal indiscipline.
In addition, the massive depreciation of the naira from about N460 to the dollar in 2023 to well below N1,500 has ballooned external debt service costs in naira terms.
However, this is not Nigeria’s first debt crisis. Under President Olusegun Obasanjo, Nigeria pursued decisive reforms marked by tighter fiscal discipline, improved oil revenue management, and, crucially, negotiations that culminated in the 2005 Paris Club debt relief, which saw Nigeria’s debt plunge to $2.11 billion, down from the $28 billion inherited.
That showed that political will, backed by credible reforms, could reset Nigeria’s debt trajectory.
What has been missing since is not knowledge but consistency. Indeed, the massive debt reduction was soon reversed as the national debt had piled up to $7.35 billion by the time Goodluck Jonathan left in 2015.
The consequences of the current debt situation are severe and deepen inequality.
Research by Chimezie Anajama and Learnmore Nyamudzanga on the sub-Saharan debt crisis shows how rising debt service crowds out social spending in health, education and poverty alleviation, disproportionately hurting women, youth and rural communities. When budgets are squeezed, classrooms decay, hospitals lack equipment and social safety nets crumble.
Edun said, “That is why it is critical at this time that we move to an era of sustainable revenues so that we can invest meaningfully in infrastructure, strengthen education and healthcare, and help the poorest and most vulnerable.”
Yet, even as the finance minister calls for restraint, the Senate insists that new borrowings are “inevitable” to plug yawning budget gaps and are “in line with global best practices.”
This fatalism is dangerous. Borrowing may sometimes be unavoidable, but inevitability must not be an excuse for waste.
The way out of this mess is obvious, but it requires discipline, something Nigeria’s political leaders must learn, fast.
First, Nigeria must confront government waste and bloated overheads with honesty.
Politicians and government officials cannot justify funding needless trips by private jets, buying sport utility vehicles, and engaging in all sorts of fripperies using borrowed funds.
Recurrent expenditure still crowds out capital spending, which remains the default victim of revenue shortfalls, while duplication of ministries and agencies drains scarce resources.
Better budgeting and prioritisation are essential so that every naira borrowed must be tied to projects that expand productive capacity, not to consumption. This is the job of the National Assembly, not adding to the burden with often dubious insertions to budgets.
Second, tax reform must go beyond intent and sloganeering. Edun rightly pointed out that compliance depends on trust. Citizens will not pay if they see a system that is unfair, porous or far removed from service delivery.
Therefore, broadening the tax base, reducing exemptions that benefit the rich and powerful, and strengthening administration are unavoidable.
As Edun noted, “No fiscal reform can deliver results if compliance is weak or uneven.”
Third, Nigeria must finally confront the dead weight of state-owned enterprises. Privatisation must be equated with fiscal survival.
The chronic losses and inefficiencies of the NNPC, which currently has a N17 trillion hole in its books, replicated in dozens of other enterprises, continue to drain public finances. Nigeria’s fiscal position dictates an end to this anomaly.
In September, the Bureau of Public Enterprises said the government had earmarked 91 firms for privatisation or commercialisation, a good step.
The liberalisation of the telecoms sector in the Obasanjo era is proof that the government needs to embark on transparent commercialisation, liberalisation and privatisation of the public assets, particularly the refineries, the Ajaokuta Steel Complex, the airports and the seaports.
However, the indecision over the touted sale of NNPC’s refineries, monuments to waste and corruption, gives no confidence that decisive action will be taken on the privatisation exercise soon.
Yet, it only makes sense that for a country sunk to its neck in debt, such asset sales will inject much-needed funds for infrastructure and other critical spending needs while charting a path towards sustainable debt reduction.
Experts also advocate a rebalancing of Nigeria’s debt mix.
Excessive reliance on foreign-currency borrowing exposes the country to exchange-rate shocks.
Greater emphasis on domestic borrowing, debt-for-development swaps and regular debt sustainability assessments can reduce risk and align borrowing with inclusive growth targets.
Ultimately, Nigeria’s debt crisis is a governance challenge. It is about choosing discipline over denial and excuses.
Edun has issued a warning in stark terms, but it is his job to ensure that he steers the economy away from unsustainable debt, not just to bemoan the situation.
