The most dangerous government debt is the debt that builds nothing

…Every loan creates two futures: One builds wealth. The other builds debt

Every government loan is a vote of confidence in the future. It says, in effect, we believe tomorrow’s economy will be large enough, productive enough and prosperous enough to repay what we borrow today.

That is why debt has never been the real danger. The real danger is borrowing without building a future that can repay it.

History has never condemned countries simply because they borrowed. The United States borrowed heavily to build highways, research institutions and strategic infrastructure. South Korea borrowed to industrialise. China financed decades of roads, ports, railways and power stations that transformed it into the world’s manufacturing powerhouse.

“This debt creates no additional productivity. It simply creates future repayment obligations. That is the most dangerous government debt. Not because it is borrowed. Because it builds nothing. The distinction matters more today than ever.”

Debt, in these cases, was not merely money spent. It was productivity brought forward. The question, therefore, is not whether a country borrows. The question is what remains after the borrowing.

A modern port. Reliable electricity. Efficient rail. Competitive industries. Higher exports. More productive workers. Greater tax revenues.

These are assets that continue generating economic value long after the loans that financed them have been repaid.

That is productive debt. Its purpose is not consumption. Its purpose is expansion. But there is another kind of debt. It leaves behind no lasting productive asset.

It finances projects that never reach completion, infrastructure that quickly deteriorates, institutions that fail to deliver value, or recurrent expenditure that disappears the moment it is spent.

This debt creates no additional productivity. It simply creates future repayment obligations. That is the most dangerous government debt. Not because it is borrowed. Because it builds nothing. The distinction matters more today than ever.

According to the International Monetary Fund (IMF), Nigeria’s economy is projected to continue growing in 2026, yet fiscal space remains constrained by weak public revenues and significant debt-service obligations. The challenge is therefore no longer simply how much the government borrows. It is whether every borrowed naira measurably increases the country’s productive capacity. That is the standard citizens should demand. Every loan should answer one simple question:

How will this investment make the economy more capable of repaying the debt that financed it?

If that answer cannot be demonstrated, the loan may merely postpone today’s fiscal pressure by transferring it to tomorrow’s taxpayers. This is where governments often make costly mistakes.

They measure borrowing by the amount received. Successful economies measure borrowing by the value created. The difference is profound. Two countries can borrow exactly the same amount. One finances electricity, logistics, irrigation, digital infrastructure and industrial corridors that attract private investment for decades.

The other finances projects that generate little economic return. Both increase their debt. Only one increases its future. This explains why debt-to-GDP ratios, while important, never tell the entire story.

A country with productive assets, expanding exports and rising productivity can sustain more debt than a country whose borrowing produces little additional economic output. In other words, debt is ultimately repaid not by government optimism but by national productivity.

The debate should therefore move beyond whether borrowing is inherently good or bad. The more important question is whether public borrowing is creating an economy that is larger, more competitive and more productive than the one that existed before the loan was taken. That is the true test of responsible fiscal leadership.

The bottom line

Every government loan creates two futures. One future leaves behind industries, infrastructure, jobs, innovation and higher national income. The other leaves behind interest payments, refinancing pressures and heavier burdens on future generations.

One expands the economy. The other merely expands the debt. History rarely remembers how much nations borrowed. It remembers what they built.

Perhaps that is the question every government should answer before signing its next loan agreement—not how much are we borrowing, but what lasting prosperity will this debt leave behind when the money is gone?

Emmanuel C. Macaulay is a development thinker and writer whose work focuses on public finance, economic transformation, governance and the structural drivers of long-term national prosperity.