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Nigeria is not entering a debt crisis, but its heavy reliance on borrowing requires urgent reevaluation, leading economists have warned. 

While the country can meet its debt obligations, experts emphasise that revenue shortfall, rather than excessive borrowing itself, poses the greater risk. They advocate for exploring alternative financing models instead of seeking new loans. 

A recent report and briefing by Macro Markets challenges alarmist-narratives about Nigeria’s public debt, attributing concerns more to high-interest rates and exchange rate volatility than to rampant borrowing. 

The report notes that public debt surged from N49.8 trillion in March 2023 to N159 trillion by December 2025 — an increase of over 200 percent.

However, this rise primarily results from naira devaluation, currency floating policies, and the reclassification of historical liabilities rather than entirely new borrowing. 

The devaluation and managed float of the naira, key policy decisions made by the current administration, have inflated the local currency value of foreign-denominated debts, increasing servicing costs even as they generate higher naira oil revenues in some periods. 

Emeritus Professor of Economics at the University of Uyo and former Director General of the West African Institute for Financial and Economic Management (WAIFEM), Akpan Hogan Ekpo, argues that comparing debt levels in nominal terms can be misleading. 

“It can sometimes be misleading to compare debt stock in nominal terms,” he said. 

“The debt issue is important; as long as you can pay your debts when due, you are not in a crisis. However, we must also consider relevant ratios.” 

Professor Ekpo highlighted key metrics such as the debt-to-GDP ratio, debt-to-revenue ratio, and debt service-to-revenue ratio. 

Nigeria’s debt-to-GDP ratio stands at around 38 percent, within the IMF’s benchmark of 40 percent. However, the debt service-to-revenue ratio is more concerning. “GDP does not pay debt; revenue pays debt,” he  stressed. Nigeria currently faces a significant revenue challenge, heavily reliant on volatile oil exports, many of which have been securitised through forward sales. 

Professor Ekpo noted that debt service as a proportion of revenue has been alarmingly high, reportedly exceeding 60 percent in recent periods, even if the debt service-to-GDP ratio remains moderate. He cautioned against panic but urged a focus on revenue generation. 

“We should not dwell on the debt issue and overlook what those planning the economy should do to make sure it is resilient. One way to achieve this is by moving toward an industrialised economy,” he added.  

“Definitely, borrowing is not our only option. In fact, we don’t have to borrow,” he stated, pointing to Public-Private Partnerships (PPPs), contractor financing, and better domestic resource mobilisation. 

He raised concerns about the quality of some borrowing: “When you are borrowing, you must be transparent. Are you borrowing to finance capital projects that enhance growth? Have you conducted enough feasibility studies to ensure the projects will be financially viable?” 

The economist warned of intergenerational inequity: “Do the people living now want to pay for that debt? No, it will be our great-grandchildren. When they come and cannot find what you borrowed the money for, they will criticise us posthumously.” 

He cited investments in the power sector that could deliver 24-hour electricity as potentially justifiable when accompanied by rigorous cost-benefit analyses. 

Regarding recent oil windfalls linked to global events, such as US-Iran tensions, Professor Ekpo urged for strategic utilisation: “Oil is a wasting asset. We should treat revenue from it as a windfall. Why not use part of it to subsidise production, support refineries, reduce pump prices, and lessen the burdens on the people?” 

Similarly, a group of prominent Nigerian economists has advised rejection of the proposed $1.25 billion World Bank loan titled “Nigeria Actions for Investment and Jobs Acceleration”, scheduled for Board approval on June 26.

Professor Olu Ajakaiye, Executive Chairman of the African Centre for Shared Development Capacity Building, stated the loan should be rejected “if the project to be funded with the loan is unlikely to promote economic growth and generate foreign exchange to service the loan”.

He warned against ‘borrowing to fund ambiguous initiatives like ‘reform’ and urged careful evaluation of expected rates of return. Dr. Yemisi Ayinde of Covenant University described Professor Ajakaiye’s stance as “sound macroeconomic prudence”.