I was recently invited to give a lecture with the above title by Professor Jide Oladipo, the erudite Dean of the Faculty of Social Sciences at Nile University, Abuja to mark their annual lecture series for the year.
It was a great honour and an interaction I greatly enjoyed, having given several lectures on similar platforms at that location and elsewhere. Nile University has a special place in my heart for many reasons, and I was lucky to also meet Professor Dilli Dogo, the Vice Chancellor and Professor of Medicine, after my lecture. The lecture itself was well attended as the hall was packed to the brim. It is always a great pleasure to speak with young people and learn from them.
The students came from diverse academic backgrounds, but there were also notable academicians as well as doctoral students in the hall, some of whom asked very challenging questions in the end. The lecture was - I believe - quite mentally stimulating that and the core messages needs to be dissipated to a larger audience especially to draw further criticisms and engagements with some of my more maverick ideas. Here goes:
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The topic was two-pronged, and basically asked two huge questions; is Nigeria's debt sustainable? (What are the factors that make a national debt sustainable?), and is Nigeria - or the present administration - fiscally responsible? (What is meant by fiscal responsibility?). Many Nigerians have been agitating about Nigeria's debts lately, and majority of Nigerians believe (erroneously I would wager), that the current government is borrowing too much therefore our debts are no longer sustainable. Some members of political opposition recently went to town about Nigeria's debt, accusing President Tinubu of borrowing some humongous amounts of money. Ambassador Reno Omokri has done justice to that subject.
Our current debts are at where they are because the N30 trillion hanging in Ways and Means from the previous administration has been added on, while the dollar value of our debts dipped initially. The rise in the naira value of Nigeria's debts - which some politicians are trying to spin to incense the public - is simply a fallout from the depreciation of the Naira. The Naira itself - after hitting a low of N1800 sometimes in 2024 - has been steadily strengthening (now circa N1370 to the US dollar).
My opinion on debt sustainability is that Nigeria's debts are pretty well-managed especially since the Debt Management Office was created in year 2000. All the indices and measurements look good on Nigeria. We have largely departed from the days of meaningless borrowings. I recall having kept newspaper clippings in 2006 of the list of Nigeria's debts that became unsustainable and of which we benefited like most African countries from a debt write-off. In Nigeria's Second Republic, states and local governments borrowed recklessly because the system was extremely loose. When the borrowings were published, we found that some states had borrowed for gargantuan projects (like underground rail systems), which never got built. Those days are gone as there are now strict requirements that need to be cleared before a state - much less a local government - can approach international or local markets for loans. Today's free flow of information, especially through new media, has also created a remarkable level of scrutiny which is good for everyone.
Nigeria's current debt in Naira terms stands at N158 trillion (Dollar value is around $116 billion), while our Naira Gross Domestic Product (GDP) is around N435 trillion ($340 billion at N1350) - by IMF figures. Of course, we know that Nigeria is back in third ranking among African economies - and growing. By proportion, Nigeria's Debt-to-GDP ratio dances around 31 per cent - 38 per cent! As that ratio goes, Nigeria's is one of the lowest in the world! We are lower than all our peers in Africa and beyond (South Africa, Kenya, Ghana, Ethiopia, Egypt, UAE, etc. Of course, the next question is to ask whether debts are paid with GDP. They are not and we know that. Nigeria's Revenue-to-Debt Servicing ratios have also improved greatly in the last few years, from 120 per cent in 2022 after the COVID-19 pandemic ended, to barely 60 per cent today.
Of course it could be lower, and it will get much lower. The trick is in the reformed tax laws. If sizeable revenues kick in, we could prise down the number towards 30 per cent. I insist that there is much money in Nigeria; a lot of liquidity and business, and that the current rate of tax and revenue compliance is just sinful. Most Nigerians who complain about our high debt servicing ratio know for a fact that they are part of the problem. Nigerians want a great country where all roads are tarred right down to the smallest village and where infrastructure is on point, just like the 1,000 years old European country they've been to, but most want nothing to do with how to finance the infrastructure boom. That is unfair and untenable.
Before I summarise the critical points to ponder which I shared with the audience, here are some important data to note:
1. Nigeria's total debt stock now at $115 billion or N158 trillion.
2. Domestic debt is 53 per cent of the debt, while foreign debt is 47 per cent.
3. The Federal Government's share of the total debt is 93 per cent, while states are carrying 7 per cent. Looks like local governments now owe nothing. In the Second Republic under a loose arrangement LGs too contracted loans. We will come back to this later.
4. Nigeria's debt now includes the N30 trillion that was being held on Central Bank of Nigeria's Balance Sheet pre-Bola Tinubu administration. This is a significant milestone in responsibility.
5. At current levels of circa 40 per cent, Nigeria's debt is very sustainable by the core measurement. The Fiscal Responsibility Act recommends that our debts should not pass 60 per cent of our GDP. ECOWAS/World Bank and similar agencies recommend 70 per cent.
6. Africa as a whole, holds a mere 1.8 per cent ($2 trillion) of Global Debts ($111 trillion) as at 2025. This shows the insignificance of African economies as a whole. Nigeria's debt is 0.09 per cent of world debt. Equally, Africa's total economy ($2.83 trillion) is 2.28 per cent of the global economy ($124 trillion). Using this comparison alone, Africa is under-borrowed. It looks like global credit is not being deployed for our economies, only crumbs. This is reminiscent of how black Americans complain that they face systemic discrimination in the credit space. Even black Brits are edged out while good credit goes elsewhere. Such discrimination shows up in how fast or slow that individuals and families build wealth in general. Please note, I am risk averse and take little or no credit facilities, but the larger picture must be contemplated for the sake of our children's children.
Other facts that I shared with the audience that day, which has necessitated this article - and which I hope will generate new thinking among Nigerian patriots and learned folks include:
a. We traced the history of national debts to the time of William I of England in 1688, who raised war bonds and the general idea is what became Bank of England today. The Americans took their first loan in the early 1800s to fight the Revolutionary War when they fought to extricate themselves from colonial bondage.
b. The early bonds were mostly war bonds. Later on there will be other bonds which nations used to build their infrastructure. These bonds were often used to secure the loyalty, allegiance or buy-in of rich and not-so-rich elites in society. Any 'big man' who invests in a long-term bond will want to ensure that the country survives.
c. The only time the Americans ever paid down their public debt was in 1835 under President Andrew Jackson. Jackson was a former Tennessee Landowner who lost money from land speculation and so hated the idea of debt. However, the moment he cleared the debts, the economy went into a downturn, there was no incentive for anyone to do anything extra, and the US economy faced a recession. US went back into debts. They realized the economy would have turned into a permanently agrarian economy if they insisted on no debts (one of Argentina's biggest problems today is that it got stuck in the agrarian era) . It is important to note that nations are not expected to repay or pay down their debts except where such has become unmanageable and unserviceable. A nation, more than an individual or a company, should get several credit facilities at any time, to the extent that there is always liquidity to sort out any short-term obligations.
d. Nigerian debts started in colonial times. Precisely in 1923-1924 the sum of 5.7 million British Pounds was recorded against Nigeria, money used for building some of our railways. In terms of our debt history, we saw a lot of looseness in the Second Republic which culminated in a debt crisis. For years, Nigeria tried to get debt forgiveness as the burden of debt crippled growth. President Obasanjo used to complain that Nigeria borrowed a mere $12 billion, paid back $35 billion over the years, but still owed $35 billion to the Paris and London Club of lenders. Eventually, the reprieve came in the year 2006, but in distinction from most other African nations, Nigeria was made to repay $12 billion in cash for a write-off totaling $30 billion. We were left with foreign debt of $5 billion after the 2006 process. This is very important abridged history that is lost on most millennial commentators.
e. Nigeria remains a small player when it comes to credit in general. The analysis here so far is about national debt. But there is also private debt (non-bank debts), as well as debts to households. We don't have a credit card culture in Nigeria yet, and most households are unburdened by debt. People build their houses, buy cars, and everything else in between, in cash. This has its own advantages and disadvantages but as Mr President has said repeatedly, we cannot continue to operate a cash economy.
f. Within Africa, Nigeria's foreign debt is the 4th largest at around $47 billion, behind South Africa ($179 billion), Egypt ($161.23 billion), and Morocco ($69.30 billion), as at the year 2025. Considering the comparative sizes of our economy with some of these peers, we are relatively under-borrowed. Again, the focus is not on reckless borrowing for the sake of borrowing, but on how we can leverage debts for infrastructure and transformative growth. Why would the world give South Africa and Egypt so much leverage when our economies are almost same size? Some will argue that our economy is even larger.
g. Nigerian states paid down about 35 per cent of their total debts in the year 2024. Many Nigerian states have not borrowed at all in the last three or four years. Many are awash with cash. Refer to the fact that the Federal Government carries 93 per cent of Nigeria's total debt, while states have a mere 7 per cent. Given that almost every Nigerian lives in a state then there is an obvious lacuna here. I wager that our states must be more aggressive in procuring finance for real development. There is obviously a huge space for infrastructure financing for the states. For example, we all agree that building interconnected rail systems will really open up our economy.
Also, agro-processing zones all around the country as well as the idea of One Local Government One Industry/Product/Factory. For me, these are latent opportunities for Nigeria at this moment, and clever Public Private Partnerships (PPP) could be adopted to really transform our nation - from the ground up. It looks presently that the Federal Government alone has been abandoned to take all the risks for national development. This is inefficient. It is perhaps why Nigerians believe that Nigeria is over-borrowed. Too much attention on the federal while the states boast of no leverage at all. My recent analysis showed how a number of enterprising states like Lagos, Enugu, Abia, and Kano have increased their budgets by at least 400 per cent since 20122. The top range is 800 per cent! With little or no borrowing. The Federal Government has however increased in Naira terms by about 200 per cent, much less in Dollar terms - meanwhile federal budgets are more dollar-linked than states. This is the core point of this whole article.
h. Debt sustainability has to do with the ability to pay, the purpose of borrowing, awareness around external shocks, fiscal frameworks, the price of debt (interest rates), and a balanced composition of debt. Fiscal responsibility has to do with issues around transparency, revenue generation, safety nets and institutional frameworks in addition to adhering by other principles of debt sustainability. Yes, Nigeria could do a lot better around fiscal responsibility across all levels of government, but it is a journey not a destination. I take a cue from South Africa where they have institutionalised very high levels of transparency at European standards. Yet, it is an imperfect system. There is work to do for everyone in this regard.
i. Perhaps the final point is around our national budget - especially budget per capita. I thank President Tinubu for being aggressive in this area despite naysayers. The 2026 budget was recently increased to about N68 trillion from N58 trillion. Each time I hear that Nigeria's budget is unrealistic I shudder. Unrealistic? By what standards. A research I performed in 2018 showed that Nigeria has one of the lowest per capita budgets in the world. In fact, we were only better than DR Congo given available data. We still are around that level, with about $150 federally budgeted per person. I align fully with the Minister of Budget and Economic Planning that our budget should not reflect our failures and our past, but rather our aspirations and ambitions for the future. Our budgets should spur us to do more, to strive more, to aspire more, to reach out for greatness. And this is where the revenue reforms come into play. Like I wrote earlier, there is good money in Nigeria. Our biggest problem is actually the informality of our economy. If, as planned, the reforms could corral in a major chunk of that informal sector, then revenues will jump, and then we will realise we can and should do a lot more. But again, the states must not stand aside and leave the risk to the federal.
j. At the conference we agreed on some remedies for the future. Some of the PhD students harped on creating and maintaining strong institutions and I remind them of the work being done by DMO and the Fiscal Responsibility Commission among others, other remedies discussed include the need for continued citizens engagement on matters of debt and budgets especially via social media, project prioritisation - especially the need for projects that can generate cashflow, the need to concentrate on infrastructure given the direct impact that infrastructure building has on reducing multidimensional poverty, and the need for long-term thinking around these matters.
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Conclusion
My conclusion at the end of the event were that Nigeria should be agnostic in terms of where to obtain financing for her projects from. There is about $4 trillion sitting in Islamic Finance and Nigeria can obtain more from there on top of some of our SUKUK funding. I believe our relationship with the Chinese net-net, as we say, has been beneficial for us. All our new airports were built by them. Ditto the rails and some of our roads. Nigeria needs hard infrastructure, not rhetoric, and not funding for intangibles. I believe our focus should be on well-put-together projects that have some cash flow - like rail systems - even if such projects don't turn profits in the interim.
It was also clear from our discussions that with the great work going on with Nigeria's finances on the monetary and fiscal sides (better sovereign ratings, much higher foreign reserves, 11 straight quarters of trade surpluses and three years of Balance of Payment surpluses), Nigerian entities - Federal government and sub-nationals as well as banks) can borrow much cheaper. For me, I think the Federal Government has played a great role at being Bi Brother for the states, to the extent that many of our states just stand back and watch. This is almost unfair.
As I concluded this writeup, the World Bank Nigeria Development Update took place on the 7th of April. One of the data points presented by the Bank showed a huge leap in capital spending by sub-nationals. Indeed, the states now have latitude for infrastructure building - some more than others. Budgets have exploded at that level. All Nigerian states are paying salaries and pensions on time. They've never had it so good, arguably.
But our states should not be building long term infrastructure with short-term liquidity. Otherwise, they will be playing small. Short-term liquidity should be leveraged for greater infrastructure. This is the time for states to collaborate on a nationwide rail system that changes the game for Nigeria, forever. This is the time to collaborate on that long-awaited agro-processing zone that cuts post-harvest losses to near zero and obtains much better proceeds for our farm products.
This is the time for states to build those solid roads that opens up every local government and ensure rural economies are integrated with the urban. This is the time for urban renewal. We are at an epochal time. Rather than having the Federal Government carrying 93 per cent of our debt burden as a nation, the states should also weigh in. A 75:25 ratio will not be too bad, after all when it comes to FAAC Allocations it's almost half and half between federal and sub-nationals. And on VAT it is 90 per cent in favour of sub-nationals. Also, President Tinubu's tax reforms are incredibly timely. I see it as Nigeria's long-awaited Elite Consensus.
Of course there is elite resistance, but everyone will conform in a short while. The revenue to back up our leveraging is right around the corner. People should complain less about this issue and be part of the solution by paying their own dues. Chicken and egg. As regards those who propose that Nigeria should rather sell off assets to raise money, even though that sounds easy but there are a lot of booby traps. Many people will complain that Nigeria is doing a fire sale if that begins to happen. I prefer the asset leasing and optimisation option instead.
'Tope Fasua is the special adviser to the President on Economic Matters.
