Nigeria’s Economic Policies in the Past Two Years: A Critical Examination of Borrowing, Productivity, and Development
Dr. Aiyeku Olufemi Samuel Global Human Capital & Energy Management Limited
Over the past two years, Nigeria’s economic policies have continued to draw both praise and criticism. While the government has introduced various reforms aimed at stabilizing the economy, the nation remains largely a consumption-driven economy rather than a production-oriented one. This raises serious concerns about the effectiveness of borrowing, the justification for loans, and the overall economic trajectory. This write-up critically examines the economic policies, borrowing practices, infrastructure development, and the state of inflation while providing recommendations for a sustainable economic framework.
The Nature of Nigeria’s Economy: Consumption vs. Production
Nigeria has remained an import-dependent economy, relying heavily on foreign goods while producing little for export beyond crude oil. The non-oil sector, including agriculture and manufacturing, has faced persistent challenges, including inadequate funding, poor infrastructure, and inconsistent policies. Government initiatives to diversify the economy, such as the National Development Plan (2021-2025), have yet to yield significant results. Without a strong industrial base, the country continues to consume more than it produces, leading to trade imbalances and a growing fiscal deficit.
The Justification for Borrowing: Necessary or Excessive?
Nigeria’s debt profile has significantly increased over the past two years, raising concerns about the sustainability of government borrowing. As of December 2023, Nigeria’s total public debt stood at approximately ₦87.38 trillion ($113.42 billion), a sharp increase from ₦42.84 trillion ($103.11 billion) in 2021. While borrowing is not inherently bad, its justification depends on whether funds are used for productive investments or squandered on recurrent expenditures and personal largesse.
In theory, borrowing should be directed towards capital projects that enhance economic growth, such as infrastructure, education, and healthcare. However, a substantial portion of Nigeria’s loans have been used to service debt and fund government operations rather than develop productive sectors. The lack of transparency in loan utilization further fuels public skepticism about whether the funds are used for national development or personal enrichment of government officials.
The Economic Impact of Borrowing: Productive or Mismanaged?
From an economic standpoint, borrowing should drive growth if effectively managed and invested in high-impact projects. Unfortunately, many projects in Nigeria are underperforming due to poor execution, corruption, and bureaucratic inefficiencies. Infrastructure development remains slow despite significant financial commitments. For instance, projects such as the Lagos-Ibadan Expressway, the Second Niger Bridge, and power sector reforms have faced delays, cost overruns, and suboptimal outcomes.
One major issue is the lack of proper project monitoring and evaluation. Many government projects experience inflated costs and misallocation of resources, leading to a high level of wastage. According to the Budget Office, Nigeria loses approximately ₦675 billion annually to inefficiencies and corruption in public projects.
Inflation and Economic Hardship
Nigeria’s inflation rate remains alarmingly high, standing at 28.92% as of February 2024, compared to 15.60% in 2022.
Nigeria's inflation rate has been fluctuating over the past few years. Here are the statistics:
- 2023: The inflation rate was 24.66%, a 5.81% increase from 2022.
- 2024: The inflation rate was 32.5% .
- 2025: As of February 2025, the annual inflation rate dropped to 23.18%, its lowest level since June 2023.
Regarding borrowing, Nigeria's total public debt increased significantly over the years, between 2023 - 2025.
Key drivers of inflation include:
Currency Depreciation: The naira has suffered significant devaluation due to forex shortages and speculative trading.
Food Price Increases: Agricultural production is hindered by insecurity, poor transport infrastructure, and rising input costs.
Excessive Money Supply: Increased government spending without corresponding revenue growth has fueled inflationary pressures.
High inflation erodes the purchasing power of citizens, increases poverty rates, and discourages investment. The government’s response, including raising interest rates through the Central Bank’s Monetary Policy Rate (MPR), has had limited success in curbing inflation.
Infrastructure Deficit and Wastages
Despite continuous borrowing, Nigeria still struggles with inadequate infrastructure, particularly in roads, power, and healthcare. The reasons include:
- Poor budget execution and diversion of funds.
- Bureaucratic bottlenecks delaying project implementation.
- Corruption leading to abandoned and substandard projects.
For instance, the 2023 capital budget allocation of ₦5.35 trillion ($13.5 billion) saw over 40% of projects either delayed or abandoned due to poor execution.
Nigeria's increased revenue is a significant development that can have a positive impact on the country's economic growth. According to the National Bureau of Statistics (NBS), Nigeria's revenue has increased by 15% in the last quarter, driven by improved oil production and tax reforms [1]. The government's efforts to boost revenue through various initiatives, such as tax reforms and improved oil production, are yielding results. This increase in revenue can be channeled towards critical sectors such as infrastructure, education, and healthcare, which are essential for the country's long-term economic development.
The reforms currently being implemented in the oil and gas sector are also a welcome development. According to the Nigerian National Petroleum Corporation (NNPC), the reforms aim to increase transparency and accountability in the sector, attract foreign investment, and boost oil production [2]. The oil and gas sector is a significant contributor to Nigeria's economy, accounting for approximately 90% of the country's export earnings and 70% of the government's revenue [3]. These reforms can help to unlock its full potential. By increasing oil production and attracting foreign investment, the government can generate more revenue and create jobs for Nigerians.
The increased revenue and reforms in the oil and gas sector can have a positive impact on Nigeria's economic growth. According to the International Monetary Fund (IMF), Nigeria's economic growth is expected to increase by 2.5% in 2024, driven by improved oil production and investment in the oil and gas sector [4]. With more revenue, the government can invest in critical infrastructure such as roads, bridges, and power plants, which can help to stimulate economic activity. Additionally, the reforms in the oil and gas sector can help to attract foreign investment, create jobs, and increase oil production, all of which can contribute to Nigeria's economic growth. Overall, these developments are a positive step towards achieving sustainable economic growth and development in Nigeria.
Recommendations for Sustainable Economic Growth
To address these challenges, Nigeria must adopt the following measures:
Enhance Production Capacity:
Shift focus from consumption to production by incentivizing local manufacturing, agriculture, and technology sectors.
Strategic Borrowing: Loans should be channelled strictly into capital projects with measurable economic returns.
Improve Project Monitoring: Implement independent audit mechanisms to track public spending and curb corruption.
Inflation Control Measures: Strengthen the naira through foreign exchange stability, reduce dependency on imports, and encourage domestic production.
Public-Private Partnerships (PPP): Encourage private sector involvement in infrastructure development to reduce the burden on government resources.
Therefore, Nigeria’s economic policies over the past two years have been a mix of necessary reforms and policy missteps. While borrowing can be justified when directed toward productive ventures, poor project execution, inflation, and wastages have hampered economic growth. To build a more sustainable economy, the government must prioritize transparency, efficiency, and a shift towards production-driven growth. Without these critical interventions, Nigeria risks falling deeper into a cycle of debt dependency and economic stagnation.
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