•Finance Minister Wale Edun
Nigeria’s fiscal landscape between 2020 and 2025 presents a stark and sobering paradox. Public borrowing surged at both federal and subnational levels, yet the corresponding productivity and developmental outcomes remain uneven, inconsistent, and in many cases deeply disappointing.
Across the 36 states, the Federal Capital Territory, and the Federal Government of Nigeria, debt accumulation became a central instrument of fiscal strategy.
However, its effectiveness in generating sustainable economic growth, infrastructure expansion, and social development varied significantly across regions, reports Daily Independent.
This five-year period exposes the fundamental tension inherent in public finance management: the need to finance urgent infrastructure and developmental priorities while safeguarding fiscal sustainability, macroeconomic stability, and prudent resource allocation.
Nigeria’s experience during this period reinforces a critical lesson: debt alone cannot substitute for strategic governance, robust planning, transparent monitoring, or targeted investment. Between 2020 and 2025, Nigeria’s subnational external debt rose from USD $4.26 billion in 2020 to USD $4.35 billion in 2023 before accelerating sharply to USD $4.81 billion in 2025.
This reflects a modest growth of 2 percent between 2020 and 2023, followed by a significant 10.7 percent increase between 2023 and 2025, culminating in a 12.9 percent rise over the five-year period.
The acceleration after 2023 signals increasing reliance on foreign financing at a time of currency volatility and exchange rate pressures, thereby exposing states to heightened repayment risks.
At the federal level, external debt followed a much steeper trajectory, rising from USD $27.21 billion in 2020 to USD $38.81 billion in 2023 and further to USD$ 42.17 billion in 2025.
This rapid escalation underscores growing dependence on external resources and deepens Nigeria’s exposure to global interest rate movements and foreign exchange fluctuations.
Domestic debt at the subnational level displayed even greater volatility. Total state obligations increased from N4.19 trillion in 2020 to a peak of N5.82 trillion in 2023 before declining sharply to N4.00 trillion in 2025.
While the decline suggests repayment, restructuring, or refinancing efforts, it raises a more fundamental question: did the aggressive borrowing between 2020 and 2023 generate productive development outcomes proportionate to its cost?
Regional borrowing patterns reveal striking differences in fiscal behavior and reinforce the underlying debt-productivity paradox. In the North Central zone, comprising Benue, Kogi, Kwara, Nasarawa, Niger, Plateau, and the Federal Capital Territory, external debt increased by 16.7 percent over the five-year period, while domestic obligations peaked at N767.1 billion in 2023 before declining to N611.2 billion in 2025. Kogi exemplifies this shift, with external debt rising from USD $28.63 million in 2020 to USD $55.35 million in 2025, even as domestic debt fell sharply from N93.67 billion in 2023 to N14.31 billion in 2025.
Kwara experienced moderate external growth from USD $43.43 million to USD $49.88 million, while domestic debt declined after reaching a 2023 peak.
The Federal Capital Territory reduced both domestic and external debt, yet the pace of fiscal consolidation does not automatically demonstrate that such adjustments translated into accelerated development outcomes or measurable improvements in service delivery.
The North East presented a more volatile borrowing trajectory. Bauchi’s external debt rose steadily from USD $129.45 million in 2020 to USD $172.78 million in 2025, accompanied by an increase in domestic debt from N97.93 billion to N158.20 billion.
Borno recorded one of the most dramatic shifts, with external debt jumping by 199 percent between 2023 and 2025, from USD $18.75 million to USD $56.21 million, despite reducing domestic obligations to N47.23 billion.
In a region still grappling with reconstruction challenges and security pressures, such borrowing patterns increase vulnerability to currency fluctuations and rising debt servicing burdens, particularly when the linkage between borrowing and tangible development outcomes remains unclear.
In the North West, several states undertook deliberate domestic debt reduction while either maintaining stable external obligations or allowing moderate increases.
Jigawa reduced domestic debt from N43.13 billion in 2023 to just N1.6 billion in 2025, while external debt declined slightly from USD $26.26 million to USD $24.51 million.
Kaduna decreased domestic obligations from N87.28 billion to N23.13 billion even as external debt grew from USD $569.38 million to USD $658.71 million.
Kano and Katsina combined rising external debt with substantial reductions in domestic liabilities. This pattern reflects a strategic shift away from local borrowing markets toward foreign financing, stabilizing short-term liquidity but increasing exposure to exchange rate and interest rate risks.
Fiscal prudence in domestic markets does not necessarily guarantee improved productivity if external borrowing is not tightly aligned with measurable investment outcomes.
The South East presents perhaps the most vivid illustration of the debt-productivity paradox. External debt across the region increased by 32 percent between 2020 and 2025, while domestic debt rose from N432.0 billion in 2020 to N566.5 billion in 2023 before declining to N375.0 billion in 2025.
Abia increased external debt from USD $87.15 million to USD $105.23 million while sharply reducing domestic obligations from N142.47 billion to N48.50 billion.
Anambra reduced both external and domestic debt, with external obligations declining from USD $115.89 million to USD$ 98.52 million and domestic debt falling from N76.40 billion to N26.67 billion.
Ebonyi pivoted from domestic to external financing, increasing external debt from USD $57.36 million to USD $95.55 million while reducing domestic debt by over 80 percent, from N76.14 billion to N14.64 billion.
Imo’s external debt rose from USD $51.22 million in 2020 to USD$ 107.67 million in 2025, while domestic debt surged to N220.84 billion in 2023 before declining to N90.51 billion in 2025.
Enugu’s domestic debt more than doubled from N93.20 billion to N194.72 billion, even as its internally generated revenue exceeded N400 billion in 2025, while external debt declined slightly from USD $120.67 million to USD $114.35 million.
Yet the most striking evidence of the paradox emerges from capital expenditure performance in 2025. Despite significant borrowing, capital execution rates fell far below budgeted levels. Ebonyi spent N179.9 billion out of N388.4 billion budgeted as at December 31, 2025, representing 46.3 percent execution. Similarly, as at September 31, 2025, Imo expended N285 billion of N697.7 billion, amounting to 40.8 percent. Enugu recorded a particularly low performance, spending only N146.9 billion of N837.9 billion, equivalent to 17.5 percent. Abia achieved N203.3 billion out of N729.4 billion, or 27.9 percent, while Anambra spent N187 billion out of N467.4 billion, representing 40 percent.
These figures reveal a structural mismatch between borrowing and actual capital deployment.
The presence of debt does not guarantee the execution of infrastructure projects, nor does it ensure improvements in public services or citizen welfare.
In the South South, resource-rich states engaged in simultaneous domestic and external borrowing that compounded fiscal risk.
Rivers’ external debt nearly doubled between 2023 and 2025, rising from USD $83.95 million to USD $181.07 million, while domestic obligations climbed to N381.21 billion.
Delta’s external debt increased modestly from USD $53.86 million to USD $57.07 million, while domestic debt nearly doubled to N465.40 billion in 2023 before declining to N247.17 billion in 2025.
Akwa Ibom reduced both domestic and external debt, reflecting a more conservative fiscal posture, while Bayelsa increased external borrowing modestly, but cut domestic debt by 56.3 percent.
Even in oil-producing states with substantial revenue inflows, borrowing did not automatically translate into sustained development gains.
The South West illustrates the tension between borrowing scale and productive efficiency. External debt in the region rose modestly by 4.1 percent, while domestic obligations surged from N1.01 trillion in 2020 to N1.72 trillion in 2023 before declining to N1.43 trillion in 2025.
Lagos maintained relatively stable external debt around USD $1.26 billion, yet domestic debt more than doubled from N493.32 billion in 2020 to N1.05 trillion in 2025.
Ogun’s external debt nearly doubled from USD $111.62 million to USD$ 214.73 million while domestic obligations declined from N293.20 billion to N168.09 billion.
Ondo, Ekiti, and Oyo experienced moderate external growth alongside temporary domestic spikes. Even within Nigeria’s most economically dynamic region, the rising scale of borrowing raises legitimate questions about efficiency, cost-effectiveness, and the productivity of deployed capital.
Across all regions, borrowing often appeared to prioritize fiscal liquidity over transformative development.
States such as Enugu, Imo, Rivers, and Ebonyi demonstrate that substantial borrowing can coexist with weak capital execution and limited measurable improvements in infrastructure or public services.
Conversely, some northern states achieved significant reductions in domestic debt, yet fiscal consolidation alone does not automatically generate transformative investment unless paired with disciplined planning, rigorous project selection, and transparent monitoring frameworks.
The implications for service delivery and citizen welfare are profound. Over-reliance on borrowing without targeted developmental outcomes risks underfunding critical sectors such as health, education, and urban infrastructure.
Debt accumulation without transformation widens inequality, depresses living standards, and erodes public trust in governance. Sustainable financing requires a carefully balanced mix of domestic and concessional external borrowing anchored in transparent reporting and robust oversight.
Strong debt management offices, project-based accountability mechanisms, measurable performance indicators, enhanced revenue mobilization, and harmonised financing strategies are essential to ensure that borrowing is aligned with productivity rather than political expediency.
However, beyond these familiar prescriptions lies a deeper structural reform imperative. Nigeria must move from debt management to debt productivity management.
Every borrowing decision should be subjected not merely to sustainability analysis but to a mandatory productivity threshold assessment that quantifies expected economic multipliers, employment elasticity, revenue feedback loops, and long-term asset valuation impact before approval.
Borrowing should be legally tied to clearly defined productive asset registers, where each loan is linked to a publicly traceable infrastructure or economic output benchmark. If capital execution falls below a defined performance corridor, automatic fiscal correction mechanisms should be triggered, including borrowing pauses or legislative review.
States should institutionalise a Debt-to-Capital Conversion Ratio that measures how much of borrowed funds translate into completed, operational, revenue-generating or service-delivering assets within a fixed time horizon.
This ratio should be published annually and benchmarked competitively across states. Borrowing without conversion into productive assets should carry fiscal penalties in the form of restricted future access to new debt windows.
Similarly, capital budgets should not merely be appropriated; they should be performance-bound. Where execution rates fall below agreed thresholds, borrowing capacity in subsequent fiscal cycles should be recalibrated downward.
