Nothing wrong with Nigeria’s borrowing if used right!

Borrowing to accelerate development and stimulate economic growth is a necessary step for Nigeria at this critical juncture. A country’s economy can be analysed through the lens of an accounting balance sheet, which comprises two sides: assets and liabilities. The relationship between these two is what policymakers must carefully manage to ensure progress.

In Nigeria’s case, expanding the capacity for asset creation through strategic debt instruments can serve as a catalyst for the development the country desperately needs. While the Fourth Industrial Revolution sweeps through much of the world, Nigeria is still grappling with challenges from the Second Industrial Revolution. This gap underscores the urgency of addressing the structural inadequacies that hinder the nation’s economic growth.

 “These are valid worries, but with the right management and accountability, borrowing can be a powerful tool to “grow big fast” and create the infrastructure needed to unlock Nigeria’s economic potential.”

Nigeria’s current revenues are insufficient to meet the demands of its growing population and to drive the economy forward. Borrowing is essential to bridge this gap. However, concerns surrounding borrowing often stem from fears of corruption, budget padding, and inflated contracts, which have historically left the nation with little to show for its debt. These are valid worries, but with the right management and accountability, borrowing can be a powerful tool to “grow big fast” and create the infrastructure needed to unlock Nigeria’s economic potential.

To truly transform Nigeria’s economy, there must be a concerted effort to rapidly develop its energy and transportation infrastructure. Investments in roads, railways, and aviation systems are critical for connecting the country and integrating its diverse regions. Such infrastructure will facilitate the movement of goods, people, and services, creating economic efficiencies that can double the size of the current economy.

This focus on infrastructure will not only stimulate immediate economic growth but also create sustainable growth levers that can support debt repayment. Properly executed, these investments can generate multiplier effects, boosting productivity and attracting further investment.

There are pressing areas of development that require urgent intervention. Social services like education and healthcare must be prioritised, given their potential to yield long-term economic benefits. A well-educated and healthy population forms the backbone of any thriving economy. These sectors have their own multiplier effects, contributing to both human capital development and economic productivity.

Additionally, sectors where Nigeria holds comparative advantages, such as agriculture and mining, need significant investment. De-risking these sectors and incentivising private sector participation can unlock their potential. For example, clear and consistent regulatory frameworks, coupled with an enabling environment, can make these industries attractive to investors. Regulators must see their role as facilitators rather than obstacles, focusing on enabling growth and innovation.

Read also: Balancing borrowing and revenue expansion: Nigeria’s path to fiscal stability

Nigeria can draw lessons from countries like India and Indonesia, which have implemented bold strategies to spur economic growth and lift millions out of poverty. Recently, an Indian minister highlighted how careful planning over two decades transformed the nation’s economy. Similarly, Indonesia introduced a policy requiring foreign businesses that wish to sell in their market to also invest locally.

This approach is something Nigeria can emulate. As one of the largest consumer markets in Africa, Nigeria has the leverage to demand investment from companies seeking access to its population of over 220 million people. Such policies could accelerate industrialisation and reduce the economy’s dependence on imports.

Even the United States under Donald Trump adopted a similar stance, insisting that foreign companies wishing to access the lucrative American market must manufacture locally. If this strategy works for developed economies, there is no reason it cannot work for Nigeria.

Nigeria must prioritise rapid industrialisation to drive economic transformation. Manufacturing offers a pathway to value addition and job creation, reducing the reliance on commodity exports. The government should aggressively promote local production by providing incentives for industries that utilise locally sourced raw materials.

Industries that have operated in Nigeria for years without making significant investments in local supply chains should be reevaluated. For example, producing competitive local brands of soaps, detergents, and other consumer goods could replace imports, driving down the country’s massive import bills and boosting local economies.

Addressing Nigeria’s trade imbalance is essential for achieving long-term economic stability. A focus on increasing exports, particularly of value-added goods, is crucial. While commodities like cocoa are doing well, they represent only a fraction of the potential. Providing incentives for farmers and exporters could further enhance Nigeria’s export profile.

The value of the Naira is another critical consideration. Its current low value reflects the underperformance of the economy. The solution lies not in artificial measures to prop up the currency but in improving productivity and boosting exports. A market-aligned exchange rate, supported by stable economic fundamentals, would enhance planning and encourage investment.

When the Naira crossed the ₦1,000 to the dollar threshold, it underscored the urgent need for structural reforms. Drawing parallels with South Korea’s “Won,” which trades at 1,350 to the dollar, Nigeria must focus on ensuring stability and purchasing power rather than obsessing over nominal exchange rates.

Nigeria cannot afford to delay the investments needed to transform its economy. Borrowing to fund development projects is not only logical but also necessary. The alternative—waiting until the population doubles before addressing these challenges—would be catastrophic.

With proper planning and execution, much of the debt incurred can be self-liquidating. The double-digit economic growth expected from these investments would create the revenues needed to service the loans and reduce poverty. This approach is not about saddling future generations with debt but about building the assets and infrastructure they will need to thrive.

Strong leadership and sound policy are essential to make this vision a reality. Transparent governance and accountability must underpin all borrowing decisions. This requires ensuring that borrowed funds are channelled into projects with clear economic returns rather than lost to corruption or inefficiency.

To support this effort, policymakers should focus on creating an enabling environment for private sector participation. Incentives, consistent regulations, and efficient bureaucracies can attract investment and accelerate development across sectors.

Nigeria stands at a critical crossroads. Borrowing to fuel economic growth is not a reckless gamble; it is a strategic necessity. By investing in infrastructure, social services, and key industries, the country can unlock its potential and lay the foundation for a prosperous future.

The time to act is now. With sincerity of purpose and bold decision-making, Nigeria can replicate the success of countries like India and Indonesia. The goal is clear: to build an economy that not only meets the needs of its growing population but also positions the nation as a global economic powerhouse.

Borrowing, if managed wisely, is not a burden but an opportunity. Nigeria must seize this moment to grow, modernise, and secure a brighter future for generations to come.

Victor Ogiemwonyi is a retired Investment Banker, and writes from Ikoyi, Lagos.