Debt and Destiny: Nigeria at a Crossroads Between Local Printing and Foreign Loans
Jerry Adesewo
As Nigeria grapples with a fragile economy and ballooning debt, a crucial question looms: should the country rely on foreign borrowing or resort to domestic financing, printing naira through Ways & Means advances? The experiences of President Muhammadu Buhari (2015–2023) and President Bola Tinubu (2023–present), when compared with benchmark African peers such as Kenya and Egypt, offer a cautionary tale and a possible path forward.
Buhari’s Gamble on Domestic Financing and Its Aftermath
When Buhari took office, Nigeria’s debt level was manageable. However, by mid-2023, debt had skyrocketed, foreign borrowings had ballooned from $7.3 billion to $37.2 billion, while domestic debt had exploded due to the rampant use of Ways & Means advances from the Central Bank. These short-term loans, intended for emergencies, were misused to fund fuel subsidies and infrastructure, in clear violation of legal limits. The result: inflation surged (food inflation hit 24%), unemployment soared to 33%, and debt servicing consumed over 90% of revenues. The nation paid a steep price for quick fixes, crowding out private investment and undermining public confidence.
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Tinubu’s Reforms and Continued Borrowing
Tinubu inherited this precarious fiscal landscape. In his first two years, debt grew from ₦97 trillion to over ₦144 trillion, an increase driven by ₦7.3 trillion in new Ways & Means advances and sizable foreign loans. He also initiated tough reforms: scrapping petrol subsidies, unifying exchange rates, and seeking structural changes. These led to economic pain, higher inflation, and a steep naira, yet his reforms unlocked multilateral funding, including a $2.25 billion World Bank loan explicitly tied to reforms and social cushioning.
Still, the debt servicing burden surpasses 130% of revenue, meaning Nigeria borrows not to build, but to repay old loans. This approach risks a debt spiral, echoing critics’ warnings of a Ponzi-like cycle.
Lessons from Kenya: Borrowing for Infrastructure
Across the continent, Nigeria’s African peers offer valuable lessons.
Kenya, under President William Ruto, has borrowed heavily, $1.5 billion via Eurobond, $600 million for road infrastructure, but has matched this with significant investment in productive assets. It has listed state enterprises on the securities exchange and securitised fuel levy bonds for roads. While debt-to-GDP hovers around 66%, and servicing consumes 68% of revenue, Kenya has actively used funds to build infrastructure and diversify revenue through privatization and enhanced compliance. Their “bottom-up” development plan shows borrowing can support growth, if matched with clear projects and revenue plans.
Egypt’s Strategic Reform-Linked Borrowing
Egypt, meanwhile, exemplifies strategic foreign borrowing. Since 2024, it has secured an $8 billion IMF-backed programme, of which $3.5 billion has been disbursed. In return, Egypt adopted tough structural reforms, including tax increases and fuel pricing adjustments. While this triggered public discontent (like inflation and subsidy cuts), they funded massive infrastructure: high-speed railways, expansion of the Suez Canal Economic Zone, and the New Administrative Capital. The outcome: long-term gains in logistics and urban capacity—but only because borrowing was disciplined and project-driven.
Nigeria’s Current Compass and Next Moves
Nigeria’s borrowing dilemma isn’t simply about choosing between foreign or domestic debt. It is about how the money is used. Domestic borrowing through ‘Ways and Means’ has often stoked inflation without driving real growth, eroding public trust. Foreign loans, especially from multilateral partners, can be effective—when tied to reforms and rigorously monitored. But without fiscal discipline, even these become a burden.
The real challenge lies in ensuring that every borrowed naira or dollar funds projects that generate returns. Egypt’s IMF-backed programme and Kenya’s securitised infrastructure bonds prove that borrowing can fuel development—when anchored on accountability and strategic planning. Nigeria must learn from these examples or risk deepening its economic fragility.
The Path Ahead: Nigeria at a Turning Point
Nigeria stands at a critical economic crossroads and must urgently shift from reactive, habit-driven borrowing to a deliberate, growth-focused debt strategy. The unchecked use of Central Bank Ways and Means advances—essentially printing money—has contributed to inflation and fiscal instability. Going forward, every naira or dollar borrowed must be tied to visible, growth-enabling infrastructure like roads, power, and agriculture, not consumed by subsidies or political expediency. Parliament must step up oversight to ensure transparency and accountability in all borrowing decisions.
A smarter path would combine concessional foreign loans with limited domestic borrowing, as seen in Kenya’s asset-backed bonds and Egypt’s reform-tied IMF disbursements. These nations offer models of how African economies can borrow responsibly while strengthening their economic base. But beyond debt, Nigeria must also tackle its weak revenue base. Without bold reforms in taxation, privatisation, and non-oil sector expansion, even well-managed debt will become unsustainable. The time for fiscal discipline is now—anything less risks mortgaging the country’s future.
Nigeria’s Crossroad
Nigeria now stands at a critical junction. Under Buhari, active money-printing fueled inflation, crowding out growth. Tinubu has grabbed essential reforms and attracted foreign financing—but debt levels are near unsustainable. Borrowing isn’t the problem—it’s how the borrowed money is used.
If Nigeria can combine disciplined borrowing with structural reform and project accountability, drawing on lessons from Kenya and Egypt, it can turn debt into opportunity. If not, it risks locking a generation into fiscal servitude, where every naira serves the lenders, and none fuels its people.
The debt dilemma won’t vanish by itself, but with focus and discipline, Nigeria can chart a new trajectory—where borrowing serves its destiny, not its debtors.
This article was concluded at 4.13 am on Saturday, July 12, 2025, and was meant for publication as the editorial of Monday, July 12, 2025, but a few hours later, the news of the former President’s death broke, and the plan to publish this article was suspended, as a mark of respect for the former president.