In a sobering address to the nation, the Speaker of Nigeria’s House of Representatives, Rt. Hon. Tajudeen Abbas, has raised alarm over the country’s rapidly escalating public debt, which has now surpassed the statutory ceiling set by the Debt Management Office (DMO). The breach, described as a looming structural crisis, underscores the urgent need for fiscal discipline, prudent borrowing, and strategic economic reforms to avert long-term damage to Nigeria’s economy. Abbas’s warning comes at a critical juncture when Nigeria faces mounting economic pressures, including inflation, currency depreciation, and sluggish growth, all of which amplify the risks posed by the nation’s debt burden.
The Scale of Nigeria’s Debt Crisis
Nigeria’s public debt, which includes both domestic and external borrowing, has grown exponentially in recent years, driven by persistent budget deficits, declining oil revenues, and the government’s reliance on loans to fund infrastructure projects and recurrent expenditures. According to the DMO, as of the latest reporting period, Nigeria’s total public debt stands at over ₦87 trillion (approximately $200 billion, depending on exchange rate fluctuations). This figure represents a significant increase from previous years and exceeds the statutory debt ceiling, which was designed to ensure fiscal sustainability and prevent excessive borrowing.
The breach of the debt ceiling is particularly concerning because it signals a departure from the fiscal guardrails established to protect Nigeria’s economy from over-leveraging. The ceiling, set as a percentage of the country’s Gross Domestic Product (GDP), was intended to cap borrowing at a level that ensures debt servicing remains manageable without compromising essential public services or economic growth. However, the current debt-to-GDP ratio, estimated at over 40%, is approaching levels that international financial institutions, such as the International Monetary Fund (IMF) and World Bank, consider risky for developing economies like Nigeria.
Speaker Abbas emphasized that the breach is not merely a statistical anomaly but a symptom of deeper structural weaknesses in Nigeria’s fiscal and economic management. “The rising debt profile is no longer sustainable,” Abbas declared during a recent session of the House of Representatives. “If we do not act swiftly, this could precipitate a structural crisis that will undermine our ability to deliver on our developmental goals and meet the needs of our people.”
Drivers of Nigeria’s Debt Surge
Several factors have contributed to Nigeria’s ballooning debt. First, the country’s heavy dependence on oil revenues, which account for a significant portion of government income, has left it vulnerable to global oil price volatility. In recent years, fluctuations in crude oil prices, coupled with production challenges due to insecurity in the Niger Delta and the global shift toward renewable energy, have reduced Nigeria’s export earnings. This has forced the government to borrow to bridge budget deficits, particularly for recurrent expenditures such as salaries and debt servicing.
Second, Nigeria’s ambitious infrastructure agenda, while necessary for long-term development, has been a major driver of borrowing. The administration of President Bola Ahmed Tinubu, like its predecessors, has prioritized large-scale projects such as road construction, railway modernization, and power sector reforms. While these investments are critical for addressing Nigeria’s infrastructure deficit, many of these projects have been financed through external loans, often from multilateral institutions like the World Bank, the African Development Bank (AfDB), and bilateral creditors such as China.
Third, the depreciation of the naira has significantly increased the cost of servicing external debts, which are denominated in foreign currencies, primarily the U.S. dollar. Over the past decade, the naira has lost over 70% of its value against the dollar, making debt repayment more expensive in local currency terms. This currency risk has compounded Nigeria’s debt servicing burden, with the DMO reporting that debt service costs consumed over 30% of federal government revenue in the last fiscal year.
Additionally, domestic borrowing through government bonds and treasury bills has surged, driven by the need to finance budget deficits and roll over maturing debts. The high interest rates on these domestic instruments, often exceeding 15%, have further strained the government’s fiscal position, diverting resources away from critical sectors such as education, healthcare, and social welfare.
The Structural Crisis: Beyond Numbers
Speaker Abbas’s warning about a “structural crisis” highlights the broader implications of Nigeria’s debt trajectory. A structural crisis, in this context, refers to a systemic failure in the country’s economic and fiscal framework that could lead to prolonged instability. This includes the risk of default on debt obligations, reduced investor confidence, and a potential economic downturn that could exacerbate poverty and unemployment.
One of the most immediate concerns is the crowding-out effect of Nigeria’s debt servicing obligations. As a growing share of government revenue is allocated to servicing interest payments, less funding is available for critical sectors such as infrastructure, education, and healthcare. In 2024, Nigeria spent over ₦6 trillion on debt servicing, a figure that surpasses the combined budgets for education and healthcare. This skewed allocation of resources undermines the government’s ability to address pressing social challenges, including a literacy rate that hovers around 60% and a healthcare system struggling to meet the needs of a population of over 200 million.
Moreover, the rising debt burden threatens Nigeria’s creditworthiness in the eyes of international investors and creditors. While Nigeria has not yet defaulted on its external debts, the increasing debt-to-GDP ratio and high debt service-to-revenue ratio have raised concerns among rating agencies. In 2023, global credit rating agencies such as Moody’s and Fitch downgraded Nigeria’s sovereign credit rating, citing concerns about fiscal sustainability and external vulnerabilities. A further downgrade could increase borrowing costs and limit Nigeria’s access to international capital markets.
The structural crisis also has social and political dimensions. Nigeria’s high poverty rate, estimated at over 40% by the World Bank, means that any economic shock resulting from a debt crisis could have devastating consequences for millions of citizens. Rising inflation, currently at a 28-year high of over 33%, has already eroded purchasing power, while unemployment, particularly among youth, remains a persistent challenge. A debt crisis could exacerbate these issues, potentially leading to social unrest and political instability.
Abbas’s Call for Action
In his address, Speaker Abbas called for urgent measures to address Nigeria’s debt crisis and prevent a full-blown structural collapse. He urged the federal government to prioritize fiscal discipline, reduce wasteful expenditure, and explore alternative revenue sources to reduce reliance on borrowing. “We cannot continue to borrow our way out of every challenge,” Abbas stated. “The time has come for bold reforms that will restore fiscal sanity and put Nigeria on a path to sustainable growth.”
Among the measures proposed by Abbas is the need for greater transparency and accountability in the management of public debt. He called for stricter oversight of borrowing activities, including a thorough review of loan agreements to ensure that funds are utilized for projects with high economic returns. The Speaker also advocated for the strengthening of institutions responsible for debt management, such as the DMO, to ensure that borrowing decisions are guided by long-term sustainability rather than short-term expediency.
Abbas further emphasized the importance of diversifying Nigeria’s economy to reduce dependence on oil revenues. He pointed to sectors such as agriculture, technology, and manufacturing as potential drivers of growth that could generate employment and boost non-oil exports. By investing in these sectors, Nigeria could increase its foreign exchange earnings, stabilize the naira, and reduce the need for external borrowing.
The Speaker also called for a comprehensive review of Nigeria’s tax system to improve revenue collection. Nigeria’s tax-to-GDP ratio, one of the lowest in the world at under 10%, reflects the country’s heavy reliance on oil revenues and borrowing to fund its budget. Abbas urged the government to implement reforms that would broaden the tax base, improve compliance, and reduce tax evasion, thereby creating a more sustainable revenue stream.
The Role of the National Assembly
As the head of Nigeria’s House of Representatives, Abbas pledged that the legislature would play a proactive role in addressing the debt crisis. The National Assembly, he said, would work closely with the executive to ensure that future budgets are aligned with the principles of fiscal sustainability. This includes scrutinizing proposed borrowings to ensure that they are justified by clear economic benefits and that loan terms are favorable to Nigeria.
The National Assembly has already taken steps to enhance its oversight of public debt. In recent years, committees on finance and appropriation have conducted hearings to review the government’s borrowing plans and debt management strategies. However, Abbas acknowledged that more needs to be done to strengthen legislative oversight and ensure that borrowed funds are not mismanaged or diverted.
The Speaker also highlighted the importance of public engagement in addressing the debt crisis. He called on Nigerians to hold their leaders accountable and demand transparency in the use of public funds. “The debt we are accumulating today will be borne by future generations,” Abbas warned. “It is our collective responsibility to ensure that we do not mortgage the future of our children.”
International Context and Lessons for Nigeria
Nigeria’s debt crisis is not unique; many developing countries face similar challenges as they grapple with the economic fallout of global events such as the COVID-19 pandemic, the Russia-Ukraine conflict, and rising global interest rates. However, Nigeria’s situation is particularly precarious due to its structural vulnerabilities, including its dependence on oil, weak institutions, and high levels of corruption.
Countries like Ghana and Zambia, which have faced debt distress in recent years, offer valuable lessons for Nigeria. Ghana, for instance, defaulted on its external debts in 2022, leading to a painful restructuring process and economic hardship. Zambia, similarly, has been engaged in protracted negotiations with creditors to restructure its debt, highlighting the challenges of managing high debt levels in the face of external shocks.
International financial institutions have also sounded the alarm about the risks of debt distress in sub-Saharan Africa. The IMF has warned that countries with high debt-to-GDP ratios and limited fiscal space are particularly vulnerable to economic shocks. For Nigeria, this underscores the need for proactive measures to manage its debt and avoid a similar fate.
The Path Forward: Strategies for Debt Sustainability
To address Nigeria’s debt crisis and avert a structural collapse, the government must adopt a multi-pronged approach that combines fiscal discipline, economic diversification, and institutional reforms. Below are some key strategies that could help Nigeria navigate its current challenges:
Fiscal Consolidation: The government should prioritize reducing budget deficits by cutting wasteful expenditure and improving the efficiency of public spending. This includes streamlining recurrent expenditures, such as the cost of governance, which consumes a significant portion of the budget.
Revenue Diversification: Nigeria must reduce its dependence on oil by investing in non-oil sectors such as agriculture, technology, and manufacturing. Policies that promote export-led growth, such as incentives for local producers and investments in infrastructure, could boost foreign exchange earnings and reduce the need for borrowing.
Debt Restructuring: The government should explore options for restructuring its debt to reduce the cost of servicing. This could include negotiating longer repayment periods or lower interest rates with creditors, particularly for external loans.
Strengthening Institutions: The DMO and other institutions responsible for debt management should be empowered to operate with greater transparency and accountability. This includes publishing regular reports on debt levels, loan terms, and utilization of borrowed funds.
Public-Private Partnerships (PPPs): To address Nigeria’s infrastructure deficit without further increasing public debt, the government should leverage PPPs to finance critical projects. This approach can attract private investment while reducing the burden on public finances.
Engaging Stakeholders: The government should engage with citizens, civil society organizations, and the private sector to build consensus on debt management and economic reforms. Public awareness campaigns can help educate Nigerians about the implications of the debt crisis and the need for collective action.
Conclusion
Nigeria stands at a critical crossroads in its economic history. The breach of the statutory debt ceiling, as highlighted by Speaker Tajudeen Abbas, is a stark reminder of the urgent need for action to address the country’s escalating debt crisis. Without swift and decisive measures, Nigeria risks plunging into a structural crisis that could undermine its economic stability, exacerbate poverty, and erode public trust in governance.
The path to debt sustainability will not be easy, but it is achievable with the right policies and political will. By prioritizing fiscal discipline, diversifying the economy, and strengthening institutions, Nigeria can chart a course toward a more resilient and prosperous future. As Speaker Abbas aptly noted, the decisions made today will shape the opportunities available to future generations. The time to act is now.
