The Debt Management Office (DMO) has reiterated that government borrowing in Nigeria should strictly be channelled towards development projects and not consumption.
In a statement issued in Abuja, the DMO cautioned the media against sensational reporting of Nigeria’s debt situation, urging accurate and factual representation of the country’s debt profile.
The agency made the clarification following misleading reports that Nigeria ranked among the largest borrowers in West Africa, citing a presentation at the West Africa Association of Public Accounts Committees (WAAPAC).
According to the DMO, the WAAPAC presentation was an overview of debt trends, challenges, and potential solutions across the West African sub-region, not a ranking of Nigeria’s debt position.
It emphasised that public debt in West Africa has risen significantly in the last decade due to increased borrowing for development and responses to global shocks such as the COVID-19 pandemic.
The DMO further explained that Nigeria’s total debt stock is comprised of the domestic and external obligations of the Federal Government, 36 state governments, and the Federal Capital Territory.
Development Economist, Professor Ken Ife, noted that borrowing is not inherently negative if used to stimulate growth.
He stressed that borrowing to fund consumption would deepen fiscal deficits, warning that adherence to the Fiscal Responsibility Act remains critical.
“We must grow our economy, and that means that we must borrow to leverage, but there is no room for us to borrow to consume,” Ife said. “There is nothing wrong with borrowing, but the question is, where do we employ this borrowing?”
Financial Expert and Director of the Institute of Capital Market Studies at Nasarawa State University, Professor Uche Uwaleke, linked Nigeria’s debt profile to low domestic revenue mobilisation and the economy’s overreliance on crude oil earnings.
He said that while government borrowing may be justified by the need to bridge infrastructure gaps, it becomes unsustainable when debt servicing obligations rise disproportionately.
“Government borrowing in itself is not bad for a developing economy struggling to plug the infrastructure gap. However, it becomes unsustainable when debt service ratios are very high. The implication is huge opportunity cost, with critical sectors such as education and health starved of funds,” Uwaleke explained.
The DMO reaffirmed its commitment to managing Nigeria’s debt responsibly and urged stakeholders, including the media, to focus on how borrowings are utilised to drive growth.
It emphasised that the key challenge remains ensuring that debt is strategically applied to infrastructure and development projects capable of generating economic returns.