Fiscal credibility cannot survive perpetual borrowing

Nigeria’s latest budget implementation figures have once again drawn attention to an uncomfortable truth about the country’s public finances. While the Federal Government has defended its economic reforms as laying the foundation for long-term stability, the disclosure that it borrowed ₦12.62 trillion in 2024, overshooting its approved borrowing target by ₦4.79 trillion, should concern policymakers and citizens alike. The development is not merely an accounting exercise. It raises fundamental questions about fiscal planning, revenue mobilisation and the sustainability of an economic model that continues to depend heavily on debt whenever projected income falls short.

The figures released by the Budget Office show that the Federal Government generated ₦20.98 trillion in revenue during the fiscal year, a substantial improvement over the previous year but still almost ₦5 trillion below the ambitious target of ₦25.88 trillion. Total expenditure, by contrast, stood at ₦34.49 trillion, remaining broadly within the approved budget. Rather than reflecting reckless spending alone, the expanded borrowing requirement arose largely because anticipated revenue failed to materialise. That distinction matters, but it should not provide comfort. A budget built on optimistic assumptions is no less problematic than one undermined by uncontrolled expenditure.

For years, Nigeria has struggled with revenue generation. The country’s tax-to-GDP ratio remains among the lowest in Africa, oil earnings remain vulnerable to fluctuations in prices and production, and non-oil revenue has yet to develop sufficient resilience to support the nation’s growing expenditure needs. Successive administrations have acknowledged these structural weaknesses, yet each budget continues to rely on projections that are difficult to achieve under prevailing economic conditions. When those expectations inevitably fall short, borrowing becomes the default solution.

The danger is that borrowing, even when undertaken for legitimate reasons, gradually narrows the government’s fiscal space. Every additional loan carries future repayment obligations, while debt servicing consumes resources that could otherwise finance education, healthcare, infrastructure and social protection. A nation cannot sustainably borrow its way out of revenue deficiencies. Debt should complement development, not compensate for weak public finance management.

Equally troubling is the growing dependence on extraordinary financing measures outside the original borrowing framework. Although governments require flexibility to respond to changing economic realities, repeated departures from approved borrowing plans weaken confidence in fiscal discipline. Budget projections should inspire public trust because they are grounded in realistic assumptions rather than optimistic expectations that require substantial revisions before the financial year concludes.

This development should also prompt a broader conversation about the quality of public expenditure. Citizens are more willing to accept borrowing when they can clearly identify the infrastructure, services and economic opportunities it creates. Greater transparency over how borrowed funds are allocated, monitored and evaluated is therefore essential. Accountability does not end with legislative approval for new loans. It extends to ensuring that every borrowed naira generates measurable public value and contributes to expanding the economy’s productive capacity.

The Federal Government deserves recognition for pursuing tax reforms and broader economic restructuring intended to strengthen public finances over time. Those initiatives, however, must be accompanied by more realistic revenue forecasting, stronger tax administration, improved collection efficiency and sustained efforts to widen the productive base of the economy. Economic planning must reflect prevailing realities rather than best-case scenarios.

Nigeria’s development aspirations require investment, and investment often demands borrowing. Yet prudent borrowing depends on credibility, discipline and transparency. Exceeding approved borrowing limits because projected revenues failed to materialise should serve as a warning rather than a recurring feature of budget implementation. The country’s fiscal future will be determined not by how much it can borrow, but by how effectively it can generate revenue, manage expenditure and ensure that every loan strengthens, rather than burdens, the economy.