Nigeria’s Endless Debt Cycle: Borrowing Today, Mortgaging Tomorrow

Nigeria’s debt profile continues to climb at an alarming rate, raising fresh concerns about the nation’s long-term financial stability. Despite being Africa’s most populous country and one of its largest economies, Nigeria finds itself trapped in a cycle where insufficient tax revenues force the government to borrow year after year, rolling over old loans with new ones.

Officials argue that Nigeria must spend more per capita to catch up with peer nations such as South Africa and Kenya. Indeed, when compared, Nigeria spends less than $200 per citizen annually on public services, while South Africa spends over $1,500 and Kenya averages above $500. On paper, the government’s spending is justified. But in reality, Nigeria’s fragile revenue base leaves it unable to sustain such commitments without piling up debt.

A History of Borrowing Without Reform

This is not the first time Nigeria has leaned heavily on debt to fill fiscal gaps. From the 1980s structural adjustment program to the debt relief secured in 2005 under President Olusegun Obasanjo, Nigeria has a long history of living on borrowed funds. Successive administrations pledged to reform revenue collection and diversify the economy away from oil dependency, yet the results have been modest at best.

Today, over 80% of government revenue goes into servicing debt, leaving little room for investments in education, healthcare, or infrastructure. The cycle is familiar: Nigeria borrows to spend, spends to cover immediate needs, and borrows again to repay past debts.

Experts Sound the Alarm

Dr. Sarah Alade, former Deputy Governor of the Central Bank of Nigeria, once warned that “a country that spends more on debt servicing than on education is mortgaging its future human capital.” That warning resonates strongly today, as federal universities remain underfunded and hospitals struggle with inadequate resources.

Economic analysts say Nigeria is borrowing for consumption rather than productivity. “Borrowing in itself is not bad if it creates value,” notes Dr. Muda Yusuf, former DG of the Lagos Chamber of Commerce and Industry. “But when debt is used to pay salaries or plug recurrent expenses, it becomes a dangerous trap.”

A Comparative Lens: South Africa and Kenya

Nigeria’s peers provide a sharp contrast. South Africa, though also struggling with fiscal pressures, sustains its spending with a broader tax base, collecting nearly 30% of its GDP in tax revenue. Kenya, meanwhile, has aggressively expanded its tax net through digital platforms, pushing its revenue-to-GDP ratio to 17%. Nigeria lags far behind, with tax revenue barely scratching 10% of GDP,  one of the lowest in Africa.

This disparity explains why both countries can fund larger public programs without spiraling into unsustainable debt, while Nigeria borrows simply to stay afloat.

The Road Ahead: Questions That Remain Unanswered

The key unanswered questions remain:

• How long can Nigeria continue rolling over debt without triggering a full-blown crisis?
• Will the government finally reform its tax system to include the vast informal sector?
• Can political leaders summon the courage to cut wasteful subsidies and curb corruption, which drain billions annually?

For citizens, the reflection is sobering. Every new loan taken today is a future burden, payable through taxes, inflation, or reduced services. For policymakers, the challenge is urgent: Nigeria must choose between painful reforms now or a painful crisis later.

A Generational Debt Burden

Nigeria’s debt story is no longer just about numbers; it’s about people. The millions of young Nigerians struggling with unemployment, poor infrastructure, and rising living costs are the ones who will ultimately pay for today’s fiscal choices. Unless urgent action is taken, borrowing today may mean robbing the future of opportunity.