Reckless Spending, Not Revenue Shortfall, Pushed Nigeria into Borrowing

Reckless Spending, Not Revenue Shortfall, Pushed Nigeria into Borrowing

By Jerry Adesewo

For months, Nigerians have been told a familiar story: the Federal Government borrowed far more than planned in 2024 because revenues fell below expectations.

On the surface, the explanation appears convincing. According to the Budget Office’s Fourth Quarter and Consolidated Budget Implementation Report, the Federal Government earned ₦20.98 trillion, falling short of its revenue target of ₦25.88 trillion by about ₦4.9 trillion. That revenue gap widened the fiscal deficit to ₦13.51 trillion, forcing the government to borrow ₦12.62 trillion—about 61 per cent above the approved borrowing target of ₦7.83 trillion.

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The conclusion appears straightforward: low revenue caused high borrowing. But that is only half the story.

A closer examination of the same figures suggests that Nigeria’s debt problem is not simply one of insufficient income. It is also one of insufficient spending discipline.

The Budget Office report itself reveals an important fact that has received far less attention. While revenue missed its target by almost ₦5 trillion, expenditure barely changed.

The Federal Government planned to spend ₦35.06 trillion. It actually spent ₦34.49 trillion, which represents a reduction of just ₦561 billion—barely two per cent of the approved budget.

In simple terms, government income fell sharply, but government spending hardly adjusted.

Any household, business or institution facing a sudden drop in income would ordinarily respond by cutting discretionary spending, postponing non-essential projects or reviewing priorities.

The Nigerian government did not. Instead, it borrowed the difference.

That distinction matters because borrowing itself is not necessarily bad. Every modern economy borrows. Nigeria needs debt to finance infrastructure, stimulate growth and bridge temporary fiscal gaps. The real question is whether borrowing results from strategic investment or from an unwillingness to adjust expenditure when revenues decline.

The 2024 figures point uncomfortably toward the latter.

The problem becomes even clearer when viewed against the composition of the additional borrowing.

Domestic borrowing remained within the approved limit at ₦6.06 trillion. However, foreign borrowing rose from the budgeted ₦1.77 trillion to ₦3.37 trillion. More intriguing was the emergence of ₦3.19 trillion in budget support, despite no provision for such financing in the original budget.

Those additional sources pushed total new borrowing to ₦12.62 trillion. The obvious question is whether more aggressive expenditure controls could have reduced the need for such extensive borrowing.

The issue is not unique to 2024. For years, Nigeria has relied on optimistic revenue projections while maintaining ambitious expenditure programmes. When oil production underperforms, tax collections disappoint or privatisation proceeds fail to materialise, borrowing becomes the default response rather than expenditure rationalisation.

This pattern has created a cycle of deficit financing that economists have repeatedly warned is becoming increasingly difficult to sustain. Fiscal analysts have consistently pointed to persistent deficit spending and limited fiscal discipline as key drivers of Nigeria’s rising debt burden.

To be fair, government officials face genuine constraints. Personnel costs, debt servicing, pensions and statutory transfers cannot simply be suspended because revenues fall short. Security challenges, social obligations and infrastructure commitments also require sustained funding.

But not every item in the budget enjoys that same level of urgency.

Across ministries, departments and agencies, there remains significant room to review overheads, eliminate duplication, reduce non-essential travel, limit administrative expenses and postpone projects that do not directly improve citizens’ welfare.

Fiscal responsibility demands that difficult choices be made during difficult times.

Private citizens already make those choices every day. Families cut expenses when salaries decline. Businesses reduce operating costs when revenues fall. Governments should not be exempt from the same principle.

This is particularly important because every naira borrowed today becomes tomorrow’s repayment obligation. Interest payments already consume a substantial share of federal revenue, reducing the fiscal space available for education, healthcare, infrastructure and social investment.

 

Te answer, therefore, is not simply to collect more revenue—although Nigeria undoubtedly needs stronger tax administration, broader revenue mobilisation and improved non-oil earnings.

I am of the opinion that revenue reform must go hand in hand with expenditure reform. Otherwise, higher revenues may simply finance higher spending without reducing the country’s dependence on borrowing.

The debate should therefore move beyond a false choice between “low revenue” and “high debt.”

Nigeria’s fiscal challenge is both a revenue problem and a spending problem. Yes, government earned less than projected. But it also spent almost exactly what it originally planned, despite knowing that the money was no longer available.

That is not merely a revenue shortfall. It is a spending choice.

As the 2027 budget cycle approaches, policymakers would do well to remember a lesson familiar to every Nigerian household: when income falls, borrowing should be the last option—not the first response.

Borrowing can build roads, railways and power infrastructure that benefit future generations.

Borrowing to preserve spending habits, however, simply transfers today’s difficult decisions to tomorrow’s taxpayers.

That is a debt no nation should willingly accumulate.