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. 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 ₦4.19 trillion in 2020 to a peak of ₦5.82 trillion in 2023 before declining sharply to ₦4.00 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 ₦767.1 billion in 2023 before declining to ₦611.2 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 ₦93.67 billion in 2023 to ₦14.31 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 ₦97.93 billion to ₦158.20 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 ₦47.23 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 ₦43.13 billion in 2023 to just ₦1.6 billion in 2025, while external debt declined slightly from USD 26.26 million to USD 24.51 million. Kaduna decreased domestic obligations from ₦87.28 billion to ₦23.13 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 ₦432.0 billion in 2020 to ₦566.5 billion in 2023 before declining to ₦375.0 billion in 2025. Abia increased external debt from USD 87.15 million to USD 105.23 million while sharply reducing domestic obligations from ₦142.47 billion to ₦48.50 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 ₦76.40 billion to ₦26.67 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 ₦76.14 billion to ₦14.64 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 ₦220.84 billion in 2023 before declining to ₦90.51 billion in 2025. Enugu’s domestic debt more than doubled from ₦93.20 billion to ₦194.72 billion, even as its internally generated revenue exceeded ₦400 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 ₦179.9 billion out of ₦388.4 billion budgeted as at December 31, 2025, representing 46.3 percent execution. Similarly, as at September 31, 2025, Imo expended ₦285 billion of ₦697.7 billion, amounting to 40.8 percent. Enugu recorded a particularly low performance, spending only ₦146.9 billion of ₦837.9 billion, equivalent to 17.5 percent. Abia achieved ₦203.3 billion out of ₦729.4 billion, or 27.9 percent, while Anambra spent ₦187 billion out of ₦467.4 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 ₦381.21 billion. Delta’s external debt increased modestly from USD 53.86 million to USD 57.07 million, while domestic debt nearly doubled to ₦465.40 billion in 2023 before declining to ₦247.17 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 ₦1.01 trillion in 2020 to ₦1.72 trillion in 2023 before declining to ₦1.43 trillion in 2025. Lagos maintained relatively stable external debt around USD 1.26 billion, yet domestic debt more than doubled from ₦493.32 billion in 2020 to ₦1.05 trillion in 2025. Ogun’s external debt nearly doubled from USD 111.62 million to USD 214.73 million while domestic obligations declined from ₦293.20 billion to ₦168.09 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 harmonized 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 institutionalize 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.
A further reform would require that external borrowing be partially hedged through dedicated foreign exchange sinking mechanisms funded during high revenue cycles, particularly for oil-producing states. Subnational governments should also be mandated to publish project-level cost-benefit dashboards accessible to citizens, linking debt drawdowns to physical project milestones in real time. This is not merely transparency for compliance; it is transparency for accountability and behavioral correction.
Nigeria must also rethink the political economy of borrowing. Debt decisions should not be evaluated solely within annual budget cycles but within intergenerational equity frameworks that estimate the long-term fiscal burden transferred to future taxpayers. Borrowing authorities should be required to demonstrate not only how loans will be repaid, but how they will expand the state’s productive frontier. In this regard, borrowing for recurrent stabilization should be structurally distinguished from borrowing for capital formation, with stricter conditionalities applied to the former.
The evidence from 2020 to 2025 is unequivocal. Subnational external debt rose by 12.9 percent. Federal external debt increased from USD 27.21 billion to USD 42.17 billion. Domestic debt peaked at ₦5.82 trillion before declining to ₦4.00 trillion. Yet in key states, capital expenditure execution rates fell as low as 17.5 percent. The data collectively reveal that borrowing alone is not development. Without disciplined fiscal management, strategic investment planning, transparent governance, and rigorous monitoring, debt accumulation risks entrenching fiscal vulnerability rather than enabling growth.
Nigeria now stands at a decisive fiscal crossroads. The country can continue to borrow within the comfort of conventional frameworks, or it can fundamentally redefine the relationship between debt and productivity. The choice is no longer technical; it is strategic and generational. Policymakers, legislators, fiscal authorities, civil society, and citizens must demand that every borrowed naira and dollar carries a measurable development obligation. Borrowing must cease to be a liquidity instrument and become a productivity covenant. The time for incremental adjustment has passed. What is required is a decisive shift from borrowing for survival to borrowing for structural transformation. Nigeria must act now, before the debt–productivity paradox hardens into a permanent fiscal trap.
*About the Author*
Prof. Chiwuike Uba is an economist and public policy analyst specialising in governance and public financial management. He advises public institutions and development partners on fiscal sustainability, debt strategy, and institutional reform, with a focus on Nigeria and Africa. He can be reached at chiwuike@gmail.com