Beyond Borrowing: Experts Urge FG to Channel Subsidy Gains into Sustainable Economic Solutions
As Nigeria’s debt profile faces renewed scrutiny, leading economists have urged the Federal and State Governments to rethink their financing strategy and channel petroleum subsidy savings into productive economic transformation—instead of defaulting to another cycle of debt accumulation.
The caution comes amid President Bola Tinubu’s formal request to the National Assembly to approve $21.5 billion in external loans and a ₦757.98 billion domestic bond issuance to fund infrastructure, social services, and legacy obligations such as pension arrears.
While the administration frames the request as necessary for “critical national needs,” development economists warn that borrowing without fiscal discipline or innovation risks negating the very gains of the fuel subsidy removal—a policy heralded as a turning point for Nigeria’s macroeconomic reform.
Where Are the Subsidy Gains Going?
Since the scrapping of the petrol subsidy in mid-2023, monthly federation allocations to all tiers of government have significantly surged, thanks to redirected revenues previously spent on under-recovery payments.
However, according to Prof. Sherifdeen Tella, economist at Babcock University, these gains have not yet translated into measurable economic improvements or reduced borrowing appetite.
“The current loan requests are not compelling in the face of increased revenue flows,” Tella told NAN. “Subsidy savings should be transparently deployed to close development gaps, rather than immediately resorting to fresh debt.”
Tella advocated for greater transparency and accountability in how increased FAAC allocations are being utilized, arguing that public infrastructure delivery should not be overly reliant on government borrowing, particularly at a time when sovereign debt servicing is crowding out social spending.
Private Capital as a Development Lever
Rather than perpetuate a borrowing-first development model, Tella urged the Federal Government and sub-nationals to adopt innovative financing models—notably Public-Private Partnerships (PPPs)—to fund infrastructure.
“In other countries, governments serve as enablers, issuing clear guidelines while private capital funds and manages infrastructure for fixed terms. Nigeria must embrace such models,” he noted.
His views echo a wider consensus among development finance professionals that domestic resource mobilisation and private sector participation are essential for fiscal sustainability and inclusive growth.
Equity Over Debt: A Case for Investment-Led Infrastructure
Dr Ayo Teriba, CEO of Economic Associates, offered a sharper prescription: pivot from debt to equity financing.
“Equity capital brings discipline, due diligence, and accountability. Investors scrutinise project viability before committing funds—unlike governments, which often implement projects reactively,” he said.
Teriba questioned the opacity surrounding the new loan request, especially regarding how funds will be channelled to sub-national governments. He warned that without granular clarity and performance frameworks, the fresh debts risk compounding inefficiencies already present in Nigeria’s fiscal architecture.
Rolling Plan ≠ Actual Borrowing, FG Clarifies
In response to rising concerns, the Federal Ministry of Finance clarified that the $1.23 billion external loan component of the 2025 budget—part of the broader 2024–2026 External Borrowing Rolling Plan—has not yet been accessed. Disbursement is scheduled for the second half of the year, and the rolling plan merely provides a framework for borrowing opportunities, not automatic drawdowns.
Still, the reassurance does little to calm fears that Nigeria’s debt sustainability is being tested against a backdrop of increasing fiscal fragility and sluggish GDP growth.
BRANDECONOMY Takeaway:
Nigeria cannot borrow its way to a $1 trillion economy. With global lending conditions tightening and debt service swallowing over 90% of government revenue, the time for efficient use of domestic revenue—like the subsidy windfall—is now.
The call from experts is clear:
- Prioritise subsidy savings for infrastructure and social investment.
- Leverage private sector capital to reduce fiscal burden.
- Strengthen equity financing mechanisms to crowd in long-term investment.
If the government must borrow, it must also explain—clearly, credibly, and transparently—how those loans will deliver measurable, transformative value.
In the age of smart economics, debt without delivery is a debt to the future.
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