Sheriffdeen Tella
Debt, internal or external, has become a significant issue in Nigeria in recent times. About two weeks ago, there was good news that Nigeria had cleared its International Monetary Fund loans. Two weeks later, in a typical Tinubu political strategy, the request for a US$24bn loan landed at the National Assembly for approval. The sequence is not surprising to economists who understand the role of the IMF in facilitating foreign loans for nations. If a country is not in good credit standing with the IMF, it might be extremely difficult to get foreign loans. International creditors respect the position of the IMF in extending loans to countries. So, to get favourable support, a potential borrower must not be a heavy debtor to the recommending agency – the IMF.
After Obasanjo cleared almost all of Nigeria’s debt and built huge external reserves, including a sovereign wealth fund, Yar’Adua’s government had enough inflow of funds from rising oil prices and did not worry about the debt market. The Goodluck Jonathan government, which earned the highest revenue from crude oil in history, went back to the loan market when his powerful ministers descended on the oil money and other revenues in corruption exemplified regime and stole the country blind.
The Buhari government started and ended with debt accumulation. I remember when Kemi Adeosun, Buhari’s first Minister of Finance, told Nigerians that the country would have to borrow its way out of debt. By the time the government completed eight years, it had patronised all creditor markets, including the IMF, which should be the last resort. We ended up in a debt trap. External debts could not be contracted because no creditor trusted Nigeria with repayment. Instead of Finance Minister Zainab Ahmed seeking advice on how the country could move forward without loans, she turned her attention to the central bank and overborrowed in contravention of the Fiscal Responsibility Act.
At the end of Obasanjo’s tenure in 2007, Nigeria’s external debt was $2.11bn, and the domestic debt was N2.17tn. It was a reduction from N3.55tn in 1999 to N2.42tn in 2007 due to debt relief on the external loans. During Yar’adua/Jonathan, i.e., from 2007 to 2015, the domestic and external debts rose. The external debt moved from $2.11bn to $3.5bn in 2011, and by 2015, when President Buhari assumed office, the total external debt (federal and states) was $10.32bn. At the time Buhari left in 2023, or more accurately, at the end of Quarter 3 of 2023, the external debt was reported as US$41.59bn, while the domestic debt was N55.93tn, equivalent to US$76.76bn, bringing the total public debt to N87.91tn, or US$114.35bn.
The post-Buhari or Tinubu era has shown a continuous trend in debt growth, although detailed figures are still emerging. The available record shows that in the first quarter of 2024, or just about nine months after Buhari left the stage, the public debt stock was N121.67tn. The external debt in this figure was US$42.12bn or N56.02tn, and domestic debt stood at US$49.35bn or N65.65tn. All the outstanding loan approvals obtained by President Buhari were taken up by President Tinubu, in the spirit of acceptance of assets and liabilities. The official figure that appeared in May 2025 shows that the total debt as of September 2024 was N142tn! And just last week, a proposal for US$24bn external borrowing was forwarded to the National Assembly for approval.
The Federal Government under President Tinubu had projected to have a US$1tn economy by 2030. The Gross Domestic Product of the economy will reach $1tn by that year. The way our appetite for loans is growing, we will soon reach the US$1tn debt economy, which will invariably push us away from the proposed US$1tn GDP economy.
The resort to external borrowing by a country is mainly based on the inability to mobilise sufficient domestic resources to meet its expenses. So, the external credits are to close the gaps between available funds and the financial needs to meet the domestic projects’ expenses. I was involved in a project for the United Nations Economic Commission for Africa on how each African country can mobilise domestic resources sustainably to meet with required expenses to achieve, locally, the objectives in the continental development plan tagged Agenda 2063. The commission was aware of the difficulty in getting external loans and also the mismanagement of the loans by most African countries when secured. Does that gap exist in Nigeria today?
In the Buhari era, a humongous amount of money was required and expended to maintain the subsidy on fuel and currency transactions. A huge amount of foreign currencies was required to import crude oil into the country, in addition to raw materials required in other industries. COVID-19 had its short- to medium-term toll on government finances. Escalation of insecurity in the farmland and crude oil sector, with resultant low production, was a major problem affecting the quantum of domestic funds. The government could not think outside the box in tackling economic issues, but boxed itself inside the loan market. There is no fund constraint now.
Currently, government policies have freed the economy from the fuel subsidy regime, giving the government lots of free money. The existence and operations of the Dangote Refinery have greatly reduced foreign exchange requirements for the importation of inputs for industrial uses. The purchase of crude oil by oil companies has also increased the flow of naira revenue to the government, apart from oil and non-oil exports, which bring foreign exchange into the coffers of the CBN. The Federal Government is awash with funds and has been able to increase allocations to state and local governments in multiples.
There is so much money coming into the federation account that the country cannot be talking of a resource gap that requires foreign loans. What is happening is mismanagement that borders on a lack of economic planning for today and the future, and the need to satisfy the political class towards the All Progressives Congress winning the 2027 elections. A country that gave the legislators foreign currency for holidays like the last Eid-el-fitri cannot claim to lack foreign funds for projects.
A country that can allocate huge sums of money for constituency allowance to the legislature without specificity cannot claim to the prudent in managing available resources. Among other profligacy, a country where the President maintains one of the largest Presidential fleets of aircraft in the world cannot claim to be poor and in need of loans. Every month, there are oversubscribed government bonds. The recently concluded Sukuk bond issue was oversubscribed by over 750 per cent. This implies there are enough funds for borrowing in the economy.
Instead of distributing the excess funds among politicians and going about borrowing, all the money flowing around should have been used for intervention in the resuscitation of redeemable industries like the textile industries in Lagos and Kaduna, the moribund pharmaceutical industries in the country, completion of Ajaokuta Iron and Steel Industries and more importantly in electricity projects, all in joint ventures with foreign companies that have competences in those industries. Does the government know that industrial growth will generate funds for infrastructural development apart from labour employment?
Despite the huge money being received by states, we still find some that have not been paying the approved minimum wage, owing workers’ salaries and allowances, as well as punishing pensioners with unpaid pensions and gratuities. The concern is not about human beings, the electorate, but about infrastructure that will bring financial returns. The labour unions should look into this case for exposure and rectification.
When the foreign reserves increase in one month, they must decrease in the following month because we spend huge sums from the reserve to service external debt. According to the Debt Management Office, in 2024, the country spent a total of N13.12tn on debt servicing. It was a 68 per cent increase from that of 2023, which was N7.8tn. It has been estimated that the country will require about US$5.2bn to service and offset some debts in 2025! How many development projects would that amount complete for the country? We cannot rely on NASS to throw out the loan request for now because it seems they have been compromised. Let us prevent moving towards a US$1tn debt economy.
