Two economists have warned that Nigeria’s rising debt profile and weak fiscal discipline are undermining the expected benefits of fuel subsidy removal, despite ongoing economic reforms by the Federal Government.
Speaking in Ilorin, Kwara State, Professor Tunde Ijaiya Gafar of the University of Ilorin and former First Bank regional manager, Babatunde Salami, said increasing debt servicing costs, naira devaluation, and poor budget implementation have continued to worsen economic hardship.
Ijaiya noted that while subsidy removal was expected to stabilise the economy, “massive debt obligations” have absorbed much of the anticipated gains.
“There is nothing wrong with borrowing. If you don’t borrow, you may not survive because resources are limited. But Nigeria is highly indebted internally and externally, and most of what should have come from subsidy savings is already tied to debt servicing obligations,” he said.
He traced Nigeria’s growing debt burden to the post-1986 Structural Adjustment Programme era, noting that persistent naira depreciation—from about ₦3 to a dollar in the mid-1980s to over ₦1,400—has significantly increased the cost of servicing foreign loans.
“When loans are taken in dollars and your currency keeps losing value, you are automatically sinking deeper into debt because repayment becomes more expensive,” he added.
Ijaiya also criticised what he described as non-transparent government spending and rising governance costs, including the proliferation of political appointments, which he said have weakened the impact of reforms.
On fuel pricing, he said the Federal Government’s decision to sell crude oil to the Dangote Refinery in naira has helped cushion the effect of global oil price volatility, warning that prices could have risen further under a fully dollarised system.
He also urged Nigeria to reduce reliance on the US dollar by exploring alternative currencies such as the Chinese yuan and Saudi riyal, citing China’s Cross-Border Interbank Payment System as a viable alternative to SWIFT.
Salami, on his part, said borrowing is not inherently problematic but faulted the government’s inability to channel loans into productive ventures.
“America has more debt than Nigeria, but the difference is how they spend borrowed funds. If loans are tied to productive ventures, repayment becomes easier. But when spending is wasteful or unclear, the loans become burdensome,” he said.
He criticised Nigeria’s budgeting system, citing poor implementation and the rollover of uncompleted projects as signs of weak fiscal discipline.
“At a point, government budgets overlap without proper completion of previous projects. If a corporate organisation performs below target, there are reviews and corrections. Government should operate with the same level of accountability,” he added.
Salami also raised concerns over weak institutional oversight, alleging that some public officials and lawmakers have failed to effectively scrutinise government spending.
The economists, while commenting on plans to secure fresh loans for infrastructure such as the proposed Sokoto-Badagry highway, said borrowing can be justified if tied to viable, well-executed projects capable of delivering long-term economic returns.
They warned, however, that without transparency, accountability, and a shift towards productive investments, Nigerians may continue to face economic hardship despite major policy reforms.
