Nigeria’s Increasing Borrowing: A Lifeline or a Looming Crisis?
Over the past 20 months, the World Bank has approved loans exceeding ₦13.21 trillion ($8 billion) for various development projects under President Bola Ahmed Tinubu’s administration. These funds have been channeled into critical sectors, with an additional $1.1 billion in new loans approved in just the past few days.
The question remains: Is this borrowing a strategic move for economic growth, or is Nigeria walking a financial tightrope?
Nigeria’s Soaring Debt Profile
According to data from the Debt Management Office (DMO), Nigeria’s total debt has surged to a staggering ₦142 trillion. The country’s 2025 budget, valued at ₦54.99 trillion, includes a debt servicing component of ₦14.32 trillion—a figure that has sparked concerns among economists and business leaders alike.
Meanwhile, Nigeria’s Net Foreign Exchange Reserves (NFER) hit $23.11 billion by the end of 2024, marking a significant recovery from $3.99 billion in 2023. While this boost might signal economic stabilization, it doesn’t necessarily offset the risks of mounting debt.
Breaking Down Recent Loans: Where’s the Money Going?
In the past few months alone, Nigeria has secured several substantial loans, including:
$500 million (March 28, 2025): Community Action for Resilience and Economic Stimulus Programme.
$552 million (March 2025): HOPE for Quality Basic Education for All programme.
$80 million (March 2025): Accelerating Nutrition Results in Nigeria 2.0.
$2.2 billion (Expected 2025): Additional funding from the World Bank.
Since July 2023, the federal government has amassed $8.6 billion in World Bank loans—equivalent to ₦13.2 trillion at the current exchange rate.
The Lagos Chamber of Commerce and Industry (LCCI) has expressed unease over Nigeria’s growing debt burden. While acknowledging the positive short-term impact of these loans on small businesses and vulnerable communities, the chamber warns that without careful management, continued borrowing could weaken investor confidence and exacerbate fiscal vulnerabilities.
Dr. Chinyere Almona, Director General of the LCCI, highlighted a critical issue: only 16% of previously approved World Bank loans have been disbursed. This raises concerns about inefficient fund allocation and the risk of mismanagement.
Nigeria’s reliance on external borrowing isn’t new. Here’s a snapshot of major World Bank loans in the past two years:
June 2023: $750 million for power sector reforms.
July 2023: $800 million to mitigate fuel subsidy removal effects.
September 2023: $700 million for the Adolescent Girls Initiative for Learning and Empowerment (AGILE) project.
June 2024: $1.5 billion for Nigeria’s Economic Stabilization Program.
September 2024: $1.57 billion for health and climate resilience projects.
October 2024: $500 million for the Sustainable Power and Irrigation for Nigeria (SPIN) project.
While these loans address infrastructure, education, and economic recovery, some experts argue that multilateral loans are particularly vulnerable to corruption due to lack of tangible, measurable outcomes.
The Global Lending Trap?
Economists have long debated whether Nigeria is falling into a debt trap. Professor Garba Sheka, an economist at Bayero University, Kano, warns that many World Bank and IMF loans come with stringent conditions that dictate national economic policies.
“We’re already servicing loans with almost 40% of our GDP. If this trend continues, the strain on the economy will become unsustainable,” Sheka cautioned.
Another financial expert, speaking anonymously, noted that while these loans offer long repayment periods—sometimes stretching 25 to 30 years—future generations will bear the burden.
Dr. Oluseye Ajuwon, from the African School of Economics, argues that Nigeria’s borrowing strategy is essential to keep the economy afloat. He contends that recent loans have helped stabilize the economy and prevent capital flight, particularly when foreign investors considered pulling out of Nigeria due to an inability to repatriate funds.
However, experts insist that to maximize benefits while mitigating risks, Nigeria must:
Ensure transparent and efficient fund allocation to avoid mismanagement.
Prioritize concessional financing—loans with low interest rates and favorable repayment terms.
Invest in revenue-generating projects that have measurable economic returns.
Tackle fundamental economic challenges like power shortages, high taxation, and forex instability
The World Bank’s continued financial support undoubtedly provides Nigeria with much-needed capital for development. However, without prudent debt management, transparent fund utilization, and a strong economic reform strategy, these loans could become a burden rather than a boost.
As Nigeria navigates these financial waters, the nation faces a critical choice: strategic borrowing for long-term growth or excessive debt with uncertain payoffs?