Debts: How Nigeria Masks Fiscal Recklessness As Economic Prudence

There is a financial delusion that afflicts the chronic debtor. Picture a man with credit cards maxed to his limits suffocating under the weight of compound interest, yet strutting into a new bank for a consolidation loan. He waves the fresh credit line as a proof of his financial virility, conveniently ignoring that he has merely swapped a noose for a chain. This is not fiscal responsibility; it is the architecture of a future catastrophe. And it is the precise metaphor for the Nigerian government’s current economic policy, a macabre dance where ballooning foreign reserves are celebrated, while the very foundation of those reserves is built on a mountain of suffocating, high-interest debt.

The Central Bank of Nigeria (CBN) has been touting a strengthened external reserves position. To the uninformed; this sounds like a victory, but apply the most fundamental law of double-entry bookkeeping: assets equal liabilities, plus equity. If your assets (reserves) are growing primarily because your liabilities (loans) are skyrocketing, your equity, the true wealth of the country is being destroyed.

The government is not creating wealth; it is performing a dangerous act of alchemy, attempting to turn Eurobonds into “reserves” and presenting the resulting illusion as an achievement worthy of applause.

There is nothing to celebrate here. This is a Ponzi scheme dressed in patriotic green and white. The result of this fiscal profligacy is written in the anguished faces of the citizenry. The statistics are no longer mere data points, they are an indictment. According to recent reports, including a stark assessment by the World Bank, over 87 per cent of Nigerians are now classified as within or below the multidimensional poverty range.

The government has successfully manufactured a republic of destitution. How did we arrive here? Through a master-class in mismanagement, the national budget has been reduced to a criminal enterprise. We have witnessed the grotesque spectacle of “budget padding,” where billions of naira are inserted for phantom projects, from non-existent airports to invisible flyovers, while the World Bank warns that government’s current policy trajectory is unsustainable, particularly regarding the spiraling cost of fuel subsidies (now disguised) and unproductive debt servicing.

The Tinubu administration’s flagship policies, the removal of petrol subsidy and the floating of the naira were the textbook of the International Monetary Fund (IMF) prescriptions sold as bitter pills for a long-term cure. Yet, even the most elementary principle of economics, the Laffer Curve, reminds us that there is a point where taxation and price shocks become prohibitive and counterproductive.

By removing subsidies without first establishing a functional social safety net or domestic refining capacity, the government did not cure a disease, it exacerbated the symptoms. It triggered cost-push inflation so violent that it has eviscerated the purchasing power of the average worker.

The law of demand states that when real income falls, consumption collapses. Nigeria is now a graveyard of small businesses because the government shattered aggregate demand, while simultaneously raising the cost of production through erratic electricity tariffs and currency devaluation.

The hypocrisy is personified by the very custodians of public trust. This is a government where a minister of Humanitarian Affairs and Poverty Alleviation was suspended over an alleged diversion of public funds meant for the poorest of the poor—a Dantean level of irony. It is an administration where the ghost of the Ministry of Humanitarian Affairs scandal, involving billions meant for social investment programmes, still haunts the corridors of power.

We have a Central Bank governor who juggles the role of economic policy with partisan political maneuvering, and a history of unaccounted oil revenues running into billions of dollars. These are not administrative errors; they are the systematic looting of intergenerational wealth covered by a thin veneer of technocratic jargon. Economists from Adam Smith to John Maynard Keynes agreed on one thing: capital is cowardly. It flees uncertainty.

The Nigerian government’s reckless borrowing, not for capital expenditure but to finance a bloated governance structure, violates the “golden rule” of public finance—that governments should borrow only to invest, not to consume. When recurrent expenditure (including the astronomical cost of maintaining the Presidency and National Assembly) accounts for over 70 per cent of the budget, you are not governing, you are liquidating the state.

The World Bank’s caution is not a suggestion; it is a distress flare. They have explicitly warned that Nigeria’s debt service-to-revenue ratio—crossing 100 per cent at some points, is a threat to macroeconomic stability. You cannot intimidate economic laws with executive orders.

The principle of Ricardian Equivalence suggests that citizens are not naïve; they know that heavy borrowing today means brutal taxation tomorrow. The current inflation is that anticipated tax is manifesting early.

So, how can Nigeria emerge from this labyrinth of self-inflicted pain? The solutions require a departure from the arrogance of power and embrace of proven economic orthodoxy. First, we must end the fetish consumption borrowing and demand and embrace a true zero-based budgeting system where every naira spent is tied to a tangible output verified by independent audit.

The era of budgeting N9 billion for a ‘pilot test scheme’ for college students must end. Second, the government must freeze non-essential recurrent spending immediately. The Revenue Mobilisation Allocation and Fiscal Commission must stop acting as a rubberstamp for obscene political salaries and drastically cut the cost of governance.

As economists stipulate, you cannot practise austerity for the poor and affluence for the political class and expect social cohesion.

Third, we must abandon the destructive myth of a strong naira propped up by foreign loans. The true value of a currency is backed by productivity. The government must unleash the real sector by fixing the power sector through decentralisation, allowing states to generate and transmit power.

A manufacturing sector that contributes less than 10 per cent to the gross domestic product will never absorb the 87 per cent poverty tsunami, regardless of how many cash-transfer slush funds are created.

Finally, there must be consequences for hidden failures. When a minister fails, the president’s silence is complicity. Nigerians deserve to know the full scale of mismanagement in the Ministry of Power, where trillions have vanished into the darkness of a national grid that collapses with the predictability of the sun setting.

Justice must be seen to be done on the massive oil theft that has starved the treasury, an operation that cannot exist without high-level official connivance.

Nigeria is not poor; it is a country with poverty of leadership. We have a government behaving like a reckless credit card owner, consolidating one toxic loan with another, blind to the fact that the creditor always writes the rules in the end. The celebration of “reserves” built on hot money and debt is the economic equivalent of digging a basement to build a penthouse.

The foundation is crumbling. It is time to stop the celebration and start the rescue before the limits of this consolidation loan are breached and the country’s sovereignty becomes the final collateral.

Adesanya wrote from Ilisan, Ogun State via ifegov@gmail.com