Can Borrowing Actually Boost the Economy?

Every government that has ever borrowed money has told the same story: we are investing in tomorrow. The roads will be built, the lights will stay on, the factories will hum, and the loans will repay themselves through the prosperity they generate.

It is a compelling narrative. The question Nigeria must ask urgently in 2026 is whether that story is actually playing out or whether the country is borrowing today simply to pay for yesterday’s borrowing, while tomorrow gets further away.

With Nigeria’s total public debt now standing at N159.28 trillion (approximately $110.97 billion) and fresh loan requests arriving at the Senate with increasing regularity, the debate is no longer theoretical. 

It lands in every market stall, every salary delay, and every infrastructure project that never seems to finish. This is the honest breakdown of where Nigeria’s debt stands, what the numbers say about growth, and what credible economists believe must change.

Where Nigeria’s Debt Actually Stands Right Now

Nigeria’s total public debt for federal and state governments rose to N159.27 trillion at the end of the fourth quarter of 2025, according to the Debt Management Office. 

That figure represents a N14.6 trillion increase from N144.67 trillion recorded in the fourth quarter of 2024  meaning the country added the equivalent of a small economy’s worth of debt in a single year.

Indicator	Figure	Context
Total Public Debt (Q4 2025)	N159.28 trillion (~$110.97bn)	Federal + State governments combined
Debt-to-GDP Ratio (2026 IMF estimate)	32.3%	Down from 35.5% in 2025
Debt Service-to-Revenue Ratio (2024)	69% (federal level)	IMF/World Bank recommend below 30–40%
Debt Service-to-Revenue Ratio (Q1 2025)	~113–116.8%	Debt service exceeded total revenue
External Debt Service Paid (Jan–Aug 2025)	$2.86 billion	69.1% of all foreign payments in period
Capital Expenditure Share of Budget (2024)	22%	vs. 72% on recurrent spending
IMF/World Bank Benchmark for Debt Service	30–40% of revenue	Nigeria’s ratio is nearly double this

The numbers in that table are not abstract. In the first quarter of 2025, Nigeria’s debt-service-to-revenue ratio rose to 116.8 percent  meaning debt servicing alone exceeded total federal revenue, forcing the government to rely on fresh borrowing merely to meet existing obligations. 

That is the definition of a debt trap, and it is happening in real time.

The Case For Borrowing: When Debt Can Drive Real Growth

It would be intellectually dishonest to frame all borrowing as inherently destructive. Economics has a long, well-evidenced tradition of productive debt the kind that builds something which generates more value than the cost of the loan.

The theoretical foundation is straightforward: if a government borrows at 6 percent to build a road that reduces logistics costs by 15 percent across an economic corridor, the investment pays for itself through tax revenues, trade volumes, and productivity gains. This is not wishful thinking. It is how South Korea financed its industrial transformation in the 1960s and 1970s, and how China funded the infrastructure backbone of its extraordinary growth trajectory between 1990 and 2010.

Nigeria has had its own examples. In 2017, the federal government raised a ₦100 billion seven-year Sukuk bond for the financing of 25 road projects across the country’s six geo-political zones. In 2024, the government raised ₦1.1 trillion to finance 124 federal road projects covering over 5,820 kilometres. These are not trivial undertakings. Infrastructure investment at that scale, properly executed, does create jobs, reduce travel costs, and open markets that were previously inaccessible.

Expert View: What Nigeria’s Economists Are Actually Saying

The expert consensus in Nigeria is not a debate between borrowing and not borrowing. It is a debate about the quality, transparency, and productive deployment of the borrowing that does occur.

Professor Godwin Oyedokun of Lead City University, Ibadan, offered the clearest benchmark against which Nigeria should measure itself: “The World Bank and IMF recommend that debt service should not exceed 30–40 per cent of government revenue for developing economies. Nigeria’s 69 per cent means that nearly N7 out of every N10 earned is used to service debt, leaving little fiscal space for development spending.”

The IMF, while projecting a gradual improvement in Nigeria’s debt-to-GDP ratio, has also flagged the systemic risk: “Constraints on the fiscal scope of low-income emerging economies could force governments to cut spending on essential services such as health, education, and social protection, which could worsen poverty.”

What Productive Borrowing Would Actually Look Like in Nigeria

Nigeria’s own experts have articulated the same framework. Productive borrowing in Nigeria’s context means open competitive bidding on all infrastructure contracts, published loan terms before legislative approval, independent cost-benefit analyses for every major project, and a structural shift in the budget away from the 72 percent recurrent spending dominance.

It means growing the non-oil revenue base Company Income Tax, VAT, and digital economy levies , so that debt service becomes a smaller share of a larger pie rather than an ever-larger share of a stagnant one.

Frequently Asked Questions

What is Nigeria’s total public debt in 2026?

Nigeria’s total public debt stood at N159.28 trillion, equivalent to approximately $110.97 billion, as of the fourth quarter of 2025. This figure covers both federal and state government obligations and represents a N14.6 trillion increase from the same period in 2024.

What is Nigeria’s debt-to-GDP ratio?

According to IMF projections, Nigeria’s debt-to-GDP ratio is approximately 32.3 percent in 2026, down from 35.5 percent in 2025. While this is below the internationally cited danger threshold of 77 to 90 percent, it does not account for Nigeria’s unusually low revenue base, which makes even moderate debt levels expensive to service.

How much of Nigeria’s revenue goes to debt service?

In 2024, debt service consumed approximately 69 percent of federal government revenue — nearly double the 30 to 40 percent ceiling recommended by the World Bank and IMF. In the first quarter of 2025, the ratio briefly exceeded 100 percent, meaning the government borrowed simply to pay existing debt obligations.

Can borrowing genuinely grow Nigeria’s economy?

Yes, but only under specific conditions. Debt-financed infrastructure that opens economic corridors, reduces logistics costs, and generates new tax revenues can produce returns greater than the cost of borrowing. The problem in Nigeria’s case is that transparency failures, procurement controversies, and a recurrent-heavy budget structure have prevented borrowed funds from consistently generating the productive returns that would justify the liability.