Can Nigeria Borrow Its Way to Prosperity? A Bold Look at Deficit Spending and Growth

Nigeria's economic narrative is one of lofty goals and even greater obstacles.  In order to keep the economy running smoothly, the government has resorted to deficit spending, or borrowing more than it makes.  This approach has drawn acclaim and criticism for everything from maintaining vital programs to financing roads and railroads.  But is it a ticking debt bomb or does it actually stimulate growth?  Let's examine the facts and figures.

Nigeria's Changes in Finance

2024 was a landmark year.  In order to increase revenue by 4.5% of GDP, the government eliminated fuel subsidies, liberalized the exchange rate, and carried out reforms.  The fiscal deficit decreased from 5.4% in 2023 to roughly 3% in 2024 as a result of these actions.  In response, the economy grew at its strongest rate in almost ten years, 4.6%, in the final quarter of 2024.  However, the IMF is issuing a warning.  Nearly half of government revenue is being consumed by debt servicing, and oil prices are still erratic.

Does Borrowing Enhance Economic Growth?

Experts are divided. Some studies argue that when kept below 5% of GDP, deficit spending can drive growth by funding infrastructure, education, and health. Others warn that frequent borrowing can spark inflation, crowd out private investment, and build up unsustainable debt. In short, borrowing can be a powerful tool, but only if used wisely.

Budget Realities and Risks

The 2024 budget ran a deficit of about ₦9.18 trillion (around 3.9% of GDP). Much of this is spent servicing debt rather than building schools or hospitals. The 2025 budget faces similar challenges, including overly optimistic oil price projections and sluggish execution of capital projects. Businesses and international partners like the IMF warn that without stricter fiscal discipline, Nigeria’s ambition to hit $1 trillion GDP by 2030 could falter.

The Road Ahead

Nigeria’s best path forward is balance, borrow to build, not just to spend. Keeping deficits in check, widening the tax net, boosting transparency, and reinvesting savings from subsidy cuts into infrastructure and social programs can turn borrowing into growth. For Nigerians, this could mean better roads, stable power, and more jobs if managed right.

Conclusion

Deficit spending is neither good nor bad by itself, it’s all about execution. Used wisely, borrowing can help Nigeria achieve its economic ambitions. Poorly managed, it can become a heavy chain holding back growth. For policymakers, the challenge is to make every borrowed naira count.

Disclaimer

This article is for informational purposes only and does not constitute financial or investment advice.