On the eve of his inauguration in 2023, President Bola Tinubu removed the fuel subsidy, citing its unsustainable costs. Given years of heavy reliance on debt to finance public spending, one might have expected this move to signal a shift toward fiscal discipline. Relatively two years later, the pattern of government borrowing and increased spending has doubled.
In February, the President signed a historic ₦54.9 trillion budget into law, marking a significant increase in government spending. The boost in revenue—fueled by higher taxes and the removal of the fuel subsidy—was expected to save Nigeria’s extravagant spending. This year alone, the country’s revenue jumped from ₦12.37 trillion to ₦21.6 trillion.
On the surface, this looks like a major win. The African Center for Human Rights (ACHR) even says it has a potential to clear outstanding debts and stimulate economic growth. But a closer look tells a different story; one where the government is still borrowing heavily instead of reducing the country’s debt burden.
Despite the surge in revenue, Nigeria’s debt keeps growing. In October 2024, the government borrowed $6.4 billion from the World Bank and another ₦950 million in 2025 to fund electricity projects. Just last month, Nigeria secured yet another $500 million World Bank loan to “boost economic resilience”.
This is not a new pattern. Nigeria has been trapped in a cycle of borrowing for decades. Under Olusegun Obasanjo, the country’s debt stood at $3.7 billion. Shehu Shagari borrowed $20 billion in 1983, and since then, successive governments have only added to the pile. Before the end of 2025, the total national debt is projected to reach ₦187 trillion ($390 billion).
“A public debt of this magnitude imposes an unbearable burden on citizens,” noted Social Action Group, a pro-democracy organisation.
More Debt, Despite Rising Revenue
With the removal of the fuel subsidy, the Nigerian government is saving $500 million (₦400 billion) monthly, and tax hikes have poured more money into government coffers. Value Added Tax (VAT) alone generated ₦7.04 billion in October and November 2024.
The Federal Inland Revenue Service (FIRS) also announced a record-breaking ₦21.6 trillion in tax revenue for 2024, exceeding the government’s target of ₦19.4 trillion. This feat, according to Dare Adekanmbi, an FIRS spokesperson, is “an unprecedented achievement in the history of FIRS.”
In October 2024, the government proposed to increase the tax on telecom services from 7.5 percent to 12.5 percent.
This tax increment is not without consequence. Adeolu Ogunbajo, the president of the National Association of Telecom Subscribers, threatened to sue the government, saying “the tax is going to hurt the telecom industry and subscribers alike. They are essentially trying to kill the industry by imposing more burdens on it.”
According to a report, the 2025 budget, ironically named the “Budget of Restoration,” devotes ₦15.8 trillion—45 percent of total revenue—to debt servicing. That’s more than four times the budget for education (₦3.5 trillion) and six times the budget for healthcare (₦2.48 trillion).
Nigeria is one of the developing countries whose excessive reliance on foreign loans is pushing into a worsening debt crisis, with rising interest rates making repayment increasingly difficult. Some nations have already defaulted, signalling the dangers of unsustainable borrowing.
For instance, Ghana defaulted on its external debt in December 2022 after its public debt surpassed 92 percent of the GDP, forcing the government to seek an IMF bailout. Sri Lanka, in the same vein, defaulted on its debt in 2022, facing its worst economic crisis in decades. With foreign reserves depleted, the country was unable to import essential goods.
Kenya and Zambia are on the brink of a similar crisis. Zambia defaulted on a $42.5 million Eurobond payment in 2020, making it the first African country to default during the COVID-19 pandemic. Years of borrowing, particularly from China, left the country struggling to pay its debts, forcing it to negotiate with creditors for relief. Kenya, too, is under immense pressure, with debt servicing consuming nearly 68 percent of its revenue as of June last year, while public services suffer from underfunding.
Many of these countries are trapped in a cycle where rising debt obligations leave little room for economic recovery.
Despite increasing revenue, Nigeria’s borrowing habit remains unchanged. If this continues, experts fear the country risks falling into a deeper financial crisis, where debt repayments will take precedence over essential services like healthcare, education, and infrastructure.
Dr. Baba Yusuf Musa, Director General of the West African Institute for Financial and Economic Management (WAIFEM), believes the government must shift focus.
“If you look at it from the revenue side, Nigeria is at a high risk of debt distress in terms of our borrowing so what we need to do now is to step up our capacity to generate revenue. The more revenue we have, the less ratio of debt to revenue we have,” Dr said.
