By Baba Lawan
Since Nigeria returned to democratic governance in 1999, external borrowing has become one of the most dominant strategies used by successive administrations to finance national development, stabilize the economy, and address long-standing infrastructural deficits. Over the years, governments have entered into loan agreements with international financial institutions and creditor groups such as the World Bank, International Monetary Fund (IMF), Paris Club, London Club, and other bilateral and multilateral lenders. These loans were officially justified as necessary instruments for stimulating economic growth, reducing poverty, improving infrastructure, strengthening public services, and restoring national development.
In principle, external borrowing is not inherently negative. Many countries across the world have used debt financing as a tool for development, especially when domestic revenue is insufficient to meet national needs. When properly managed, borrowed funds are invested in productive sectors such as infrastructure, education, agriculture, healthcare, energy, and industrial development. These investments are expected to generate long-term economic returns that not only repay the loans but also improve the welfare of citizens.
However, Nigeria’s experience over the past two decades presents a deeply troubling contradiction. Despite continuous borrowing running into billions and later trillions of naira, the living conditions of the majority of citizens have not improved in any meaningful way. Instead, poverty, unemployment, inflation, insecurity, and infrastructural decay remain widespread across the country. This situation raises serious questions about the effectiveness of Nigeria’s borrowing strategy and whether the borrowed funds have been efficiently managed for development purposes.
According to official debt reports, Nigeria’s total public debt stood at about ₦12.6 trillion in 2015. By 2025, the figure had risen dramatically to over ₦159 trillion, representing one of the fastest debt accumulations in the country’s history. External debt also rose significantly during the same period, increasing from roughly $10.32 billion in 2015 to nearly $51.86 billion by 2025. Under the administration of President Bola Ahmed Tinubu, the debt profile continued to expand due to new borrowing aimed at financing budget deficits, stabilizing the economy following fuel subsidy removal, supporting infrastructure projects, and managing exchange rate pressures. Between 2023 and 2025 alone, Nigeria’s total debt reportedly rose from about ₦87 trillion to over ₦159 trillion.
Despite these massive financial inflows, the economic realities faced by ordinary Nigerians remain harsh and often unbearable. Across rural and urban communities, access to basic infrastructure remains limited. Electricity supply is unstable and insufficient, healthcare systems are underfunded and overstretched, education is often poorly resourced, and unemployment continues to rise. Inflation has further worsened the situation, reducing the purchasing power of households and increasing the cost of basic necessities such as food, transportation, and housing. As a result, millions of Nigerians continue to live in multidimensional poverty despite the country’s vast natural and human resources.
One of the most pressing concerns raised by analysts is that borrowed funds have not always been directed toward productive investments capable of generating sustainable economic returns. Instead, there are widespread concerns about corruption, mismanagement, policy inconsistency, weak institutional oversight, and poor execution of development projects. In many cases, infrastructure projects funded through external loans are either abandoned, poorly implemented, or inflated beyond reasonable cost estimates. These inefficiencies significantly reduce the developmental impact of borrowed funds and deepen public frustration.
Another major challenge is the burden of debt servicing. A significant portion of Nigeria’s national revenue is now allocated to repaying existing debts and servicing interest obligations. This leaves limited fiscal space for investment in critical sectors such as education, healthcare, agriculture, and social welfare. When a large percentage of government income is used to repay loans, the capacity of the state to provide essential services is greatly reduced. This creates a cycle in which borrowing is used to fill budget gaps, but increasing debt obligations further weaken the government’s financial stability.
The long-term consequences of this situation are deeply concerning. Economic growth becomes constrained as public investment declines. Infrastructure development slows down, and social services deteriorate further. At the same time, the population continues to grow, placing additional pressure on already weak systems. This imbalance between rising population needs and declining public capacity contributes significantly to widespread poverty and inequality.
Scholars and economists have long argued that borrowing alone cannot guarantee development. Debt can only be effective when it is supported by strong institutions, transparent governance, and efficient resource allocation. Without these elements, borrowed funds risk being wasted or diverted away from intended development goals. In Nigeria’s case, weak institutional structures and persistent governance challenges have limited the effectiveness of public borrowing.
One of the major underlying issues is corruption. Corruption reduces the efficiency of public spending and weakens the impact of government policies. When funds are misappropriated or diverted for personal gain, development projects suffer, and citizens are deprived of essential services. Over time, this erodes public trust in government institutions and reduces confidence in economic policies. Corruption also increases the cost of projects, as inflated contracts and poor procurement practices lead to wasteful spending.
Closely related to corruption is the problem of weak accountability. In many cases, there is insufficient monitoring of how borrowed funds are used. Project implementation is often poorly supervised, and there are limited consequences for failure or mismanagement. This lack of accountability creates an environment where inefficiency can persist without correction. As a result, even large-scale borrowing may produce very limited visible impact on the ground.
Policy inconsistency is another significant challenge. Frequent changes in government priorities and economic policies often lead to the abandonment of ongoing projects. Each administration may introduce new development plans without completing previous ones, resulting in duplication of efforts and wastage of resources. This lack of continuity undermines long-term planning and reduces the effectiveness of development financing.
Security challenges have also contributed to Nigeria’s economic difficulties. Insecurity in several parts of the country disrupts agricultural production, discourages investment, and increases the cost of doing business. When farmers are unable to access their lands due to conflict or violence, food production declines, leading to higher food prices and increased inflation. These conditions further deepen poverty and reduce the impact of development spending.
At the same time, Nigeria’s dependence on oil revenue has made the economy vulnerable to external shocks. Fluctuations in global oil prices directly affect government revenue, often forcing the state to resort to borrowing to cover budget deficits. This overreliance on a single commodity limits economic diversification and reduces resilience in times of economic crisis. As a result, borrowing becomes a recurring solution rather than a temporary measure.
The social consequences of these economic challenges are increasingly visible. Youth unemployment remains high, pushing many young people into informal economic activities or migration in search of better opportunities. This brain drain deprives the country of skilled manpower needed for development. Small businesses struggle to survive due to inflation, high operating costs, and unstable infrastructure. Many households are forced to adopt coping strategies that reduce their quality of life, including cutting down on essential consumption.
Rural communities are particularly affected. In many areas, roads are in poor condition, making transportation of goods and services difficult. Access to healthcare is limited, and educational facilities are often inadequate. These conditions widen the gap between urban and rural development, increasing inequality across the country. Farmers face additional challenges such as insecurity, lack of access to credit, and poor storage facilities, which reduce agricultural productivity and income.
Urban centers are not exempt from these difficulties. Rapid population growth has placed pressure on housing, transportation, electricity, and public services. Informal settlements continue to expand as people migrate to cities in search of better opportunities. However, the available infrastructure is often insufficient to meet growing demand, leading to congestion, unemployment, and rising living costs.
Many intellectual observers argue that Nigeria’s development challenge is not simply a lack of resources but a problem of governance and institutional weakness. The country possesses significant natural wealth, including oil, gas, minerals, and fertile agricultural land. It also has a large and youthful population that could drive economic growth if properly harnessed. However, without effective institutions and accountable leadership, these advantages cannot be fully utilized.
There is also the argument that external borrowing may create long-term dependency if not properly managed. Excessive reliance on foreign loans can reduce incentives for domestic revenue generation and weaken economic sovereignty. Countries that depend heavily on external financing may also face pressure to adopt policies influenced by external creditors, which may not always align with national priorities.
Despite these challenges, borrowing can still play a positive role if it is carefully managed. When invested in productive sectors such as infrastructure, energy, and industrialization, borrowed funds can stimulate economic growth and create employment opportunities. The key issue is not borrowing itself but how effectively the borrowed resources are utilized.
Ultimately, Nigeria’s experience with external borrowing since 1999 highlights a fundamental governance challenge. The persistent gap between rising debt and poor development outcomes suggests that financial resources alone are not sufficient to drive national transformation. What is required is strong leadership, transparent governance, effective institutions, and a commitment to using public resources for the collective good.
Until these conditions are met, Nigeria may continue to experience a situation where billions and trillions are borrowed in the name of development, while the majority of citizens remain trapped in poverty, unemployment, and inadequate living conditions.
Tags
Opinion