Nigeria’s debts and future development

Politics Spice Special Features Education Sex & Relationship Interview Columns Opinion Advertise with us Nigeria’s debts and future development Columns October 26, 2026 1:44 am Prof. Sheriffdeen Tella (Lecturer, Department of Economics, Olabisi Onabanjo University) and David Adonri (Chief Executive Officer, High Cap Securities Limited)

Two mutually exclusive reports on Nigeria’s debts changed my topic for this week. Don’t guess about the topic because it is outside my normal chores. It has to do with politics of the day. The World Bank reported that Nigeria’s debt servicing in the first quarter of 2026 exceeded that period’s revenue. The same Bank that would, in one breath, caution the government about debt accumulation and, in another breath, offer new loans, was at it again. The second report has to do with the requests by State governments for suspension of deductions of Paris Club repayments from their federal allocations.

In the first case, the World Bank, in its report in the October 2026 Nigeria Development Update, claimed that the interest-to-revenue ratio for the period under concern was 124 per cent. The Ministry of Finance disputed the claim speedily and vehemently. The Ministry explained that the report was misleading on three grounds. The first ground was that the report failed to note that part of the payment included State debts, resulting in overstatement of the ratio. Secondly, the figures did not include income earned by government agencies and enterprises yet to be remitted to the treasury, and third was that the report was underestimated because some statutory payment schedules usually come in by the second quarter of the year and would be wrong to view the existing revenue and debt servicing as annual debt obligations.

The Bank was concerned about the country’s debt sustainability. It has the right to be so concerned as a global financial institution serving as, among other things, adviser to governments on financial and economic matters. Why would the government want to separate payment for State debts from that of the federal government when the payments are normally effected from the same source where the States get their allocations and it is deducted from that allocation? Why would the World Bank be concerned with unremitted income when dealing with the government’s available data for both payments and revenue; why get involved with non-existent data?

We have warned constantly that the Nigerian government must be cautious about growing its debts, particularly external debt. The debt servicing and payback period is always very tough for borrowers, particularly when the loans cannot be accounted for in terms of visibility of usage, return on investment, and lack of physical auditing. The problems start from the inability to pay public sector workers’ salaries and wages, which we have passed through during the time of President Shehu Shagari, the beginning of President Olusegun Obasanjo first term the end of President Goodluck Jonathan era and throughout President Muhammadu Buhari’s tenure. The second stage is the difficulty in implementing annual budgets, which is reappearing today as it was sometime in the past. Both cases stall economic growth and development as they result in low production and productivity, low levels of employment and income generation, rising poverty and breakdown of law and order.

When President Obasanjo paid off the humongous debts owed by the military, the country felt a great relief and a fresh anointing. The country’s external debt at the end of Obasanjo’s tenure in 2007 was mere US$2.11bn from US$36bn in 1999, and the domestic debt was N2.17tn.

According to the Debt Management Office, total external debt at the end of President Goodluck Jonathan’s tenure in 2015 was approximately US$63.7 to US$63.8bn, despite high oil revenues during that period.

This period spanned the presidencies of Umaru Musa Yar’Adua and Goodluck Jonathan.

When President Bola Tinubu assumed office in May 2023 from President Muhammadu Buhari, Nigeria’s public debt was between US$108.29 and US$113.42, depending on the exchange rate and reporting date. During President Bola Tinubu’s three years, total public debt is approximately US$120.9bn. The external debt in this period has risen by US$11.4bn. Nigeria is and remains in trouble. Today’s economic development trouble stems from debts incurred under President Jonathan and in the early period of President Buhari. President Tinubu’s problems will be carried by his successors.

The States in the federation reportedly rejected deductions for Paris Club loan repayment from their federal allocation in the September 2026 revenue sharing cycle on the ground that it would squeeze their finances. The deductions, they claimed, would prevent them from meeting financial obligations. The complaint became louder when the federal allocation started declining. But whatever they spent the loans on should be yielding revenue by now. Normally, most States depend largely on federal allocation as a source of revenue and should not have dabbled into borrowing for consumption, which is what happens.

The states are like a student who depends on his parent for monthly upkeep but continues to live above the available means. He must find a way of paying the debt. They must find a way of paying the debt, and the federal government, in this case, holds the key. The States were even borrowing from the commercial market, where repayment periods are short- to medium-term and interest rates are market-determined, thus very expensive. That must be because, in the Nigerian spirit, they have the notion or even the conviction that there will be debt forgiveness. No one forgives debt these days.

I overheard some families discussing NELFUND within the context of debt forgiveness. They said it’s better to take the loans now, whether the parent can afford the school fees or not, because the government may turn the loans into bursaries! The debt-forgiveness mentality should not be allowed to persist. When NELFUND loans are repaid, it allows future generations to benefit, even when the country is down financially again.

The States are already looking for a lifeline to meet regular expenditure. They have cited N240bn in savings that should be shared among the three tiers of government rather than retained under a federal government’s proposed arrangement. It is imperative to properly audit the country’s debt profile and make the results public, in the spirit of transparency and accountability. Such auditing can also caution the government against further debt accumulation.

Federal and state governments must start cutting costs based on the size of their budgets. Let the annual budget reflect the state of the economy. We cannot be showing off with the budget. Let budgets reflect our status so that we can work hard to improve. The failure of the budget is not in the proposed amount, but in budget performance. The federal government budgets in the last three years have been bogus, trying to compare each budget with that of South Africa or other African countries in our income group. We have to be ourselves and work hard to improve. The country’s economic policy should shift from a revenue focus to generating employment, which will improve income and revenue.

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