Public borrowing in Nigeria consistently fails to translate into measurable development outcomes

For decades, a quiet assumption has guided how nations think about borrowing: if a country takes out a loan to build a road, a power plant, or a school, that investment will eventually pay for itself. The logic is straightforward. Money borrowed today becomes a bridge or a factory tomorrow, which generates jobs and income, allowing the nation to repay the debt while leaving its people better off. This idea sits at the heart of how economists view public finance. It suggests that debt is a tool, a lever that can lift a struggling economy if used correctly. However, there is a second, darker possibility that researchers have long suspected but rarely traced in such detail: what happens when the money is borrowed but never actually builds anything? What happens when the loan is spent on daily expenses, or vanishes into poorly managed projects, leaving the country with a bill it cannot pay and nothing to show for it? This is the question that drives a new analysis of Nigeria's economic history. The study asks a simple, painful question: after sixty years of borrowing, why does the country still struggle with the same problems of poverty, poor infrastructure, and weak power supply that it faced before it took out its first loan?

The researcher, Chris AC-Ogbonna from Veritas University, did not run computer simulations or build complex mathematical models to answer this. Instead, they acted as historians of money, sifting through nearly seventy documents spanning from 1970 to 2024. These documents included official government reports, records from the Central Bank, and data from international lenders like the World Bank and the International Monetary Fund. They looked at the story of Nigeria's debt not as a single number, but as a timeline of decisions. They traced how the country moved from taking small, low-interest loans for specific railway projects in the 1960s to borrowing massive sums from global markets in the 2010s and 2020s. The goal was to see if the money actually arrived at its destination. Did the funds meant for electricity generation end up powering homes? Did the loans for education build schools that stayed open? By comparing what the government said it would do with the money against what actually happened on the ground, the study reveals a pattern that has repeated itself for generations.

The findings are stark. The study shows that Nigeria's public debt has grown from a modest £5.7 million in 1923 to approximately ₦144 trillion by 2026. That is a staggering sum, equivalent to about $96 billion. Yet, despite this massive accumulation of debt, the country has not seen the transformation that borrowing is supposed to bring. The researcher found that borrowed funds are frequently used for consumption rather than productive investment. Instead of building new factories or fixing the power grid, the money often goes to pay the interest on previous loans. In some years, the government has spent more than 150 percent of its total revenue just to service its debt. This means the country is borrowing new money simply to pay the interest on old money, a cycle that leaves nothing left for schools, hospitals, or roads. The study points out that this is not an accident of economics, but a failure of governance. The institutions meant to manage the money lack the accountability to ensure it reaches its intended purpose.

A crucial part of the analysis challenges how people usually measure a country's debt health. For years, experts have looked at the debt-to-GDP ratio, which compares the total amount a country owes to the total size of its economy. By this measure, Nigeria often looks safer than countries like Japan, which owes a much larger percentage of its economy in debt. However, the study argues this metric is misleading for Nigeria. A country does not repay its debts using its total economic size; it repays them using the actual cash it collects from taxes and oil sales. The researcher highlights that while Japan's debt is huge, the government collects enough money to pay the interest easily. In Nigeria, the opposite is true. Even though the total debt looks smaller compared to the economy, the government collects very little revenue, and what it does collect is swallowed up by debt payments. The study notes that in 2024, debt servicing consumed roughly 150 percent of government revenue, forcing the country to borrow just to stay afloat. This creates a situation where the state has no money left to run the country or build its future, regardless of what the debt-to-GDP ratio says.

The history of borrowing in Nigeria reveals a cycle that has repeated across different political eras. In the 1970s, during an oil boom, the country borrowed to fund development, but when oil prices fell, the debt became a burden. In 2005, Nigeria achieved a "fiscal miracle" when creditors forgave $18 billion of its debt, wiping out over 90 percent of what it owed. The hope was that this fresh start would allow the country to invest in its people and infrastructure. But the study finds that the relief was temporary. Within a decade, borrowing returned, and by 2024, the debt had climbed back to levels not seen before the relief. The researcher observed that under various administrations, from the military regimes of the 1980s to the elected governments of the 2010s, the pattern remained the same. Money was borrowed for projects like railways and power plants, but corruption, poor management, and a lack of oversight meant that the results were often invisible. For instance, while the country borrowed billions for the power sector, it still generates only about 4,000 megawatts of electricity for over 200 million people, a fraction of what neighboring countries with smaller populations produce.

The study also identifies a dangerous shift in how Nigeria is borrowing. In recent years, the country has turned increasingly to commercial loans from international markets, known as Eurobonds, rather than cheaper loans from development banks. These commercial loans come with higher interest rates and must be repaid in dollars. The researcher points out that when the value of the Nigerian currency, the naira, falls, the cost of these dollar loans skyrockets. A loan that seemed affordable in one year can become twice as expensive the next simply because the currency has weakened. This currency risk has done more damage to the country's financial stability than many realize. The study notes that in 2025, Nigeria issued $2.35 billion in new bonds, but this money was not used to build a new bridge or a hospital. It was used to pay off an older bond that was due. The money came in, sat in a government account for a moment, and then flowed right back out to the investors. No new infrastructure was created; the country simply kicked the can down the road to avoid defaulting.

Ultimately, the paper concludes that the problem is not the act of borrowing itself, but what happens after the money is received. The researcher argues that debt can be a powerful tool for development, as seen in other parts of the world, but only if the borrowed funds are invested in productive ventures that generate returns. In Nigeria, the link between borrowing and development has been broken by weak institutions and a lack of accountability. The study suggests that without fixing the way the government manages these funds, more debt relief will only offer a temporary pause, not a cure. The author proposes practical steps to break the cycle, such as requiring the government to prove that past loans achieved their goals before taking on new ones, and ensuring that international lenders focus on governance reforms rather than just technical financial fixes. The central lesson is clear: a country can borrow its way to prosperity, but only if it has the discipline and the systems to make sure the money actually builds something real. Without that, borrowing becomes a trap, leaving the nation with a mountain of debt and a future that remains unfulfilled.