Nigeria Repaying Debts With More Borrowing Amidst Revenue Decline, Says Afe Babalola

Aare Afe Babalola, renowned legal expert and founder of Afe Babalola University, has raised alarm over Nigeria’s debt crisis, stating that the country is now repaying its debts by taking on more debt due to dwindling revenue.

In a recent statement, Babalola highlighted Nigeria’s troubling debt profile, revealing that the country’s external debt is the largest among sub-Saharan African nations despite past debt waivers from international creditors like the Paris Club and London Club. He emphasized that accumulated arrears have damaged Nigeria’s standing within the global financial community.

Babalola noted that in 2020, debt servicing consumed a staggering 83% of Nigeria’s revenue, and by the start of 2024, federal revenue stood at N449.7 billion, a figure dwarfed by debt repayments. He further revealed that Nigeria’s debt now represents 168% of its revenue, a significant cause for concern.

“The sad reality is that Nigeria is now repaying debts with debt, since its revenue can no longer cover its obligations,” he stated.

Babalola also expressed concern about Nigeria’s continued borrowing, referencing the World Bank’s approval of $1.57 billion in loans for health, education, and energy in September 2024, and an additional $2.25 billion for economic stabilization earlier in the year. These, coupled with an $8.8 billion loan secured using unexplored oil as collateral, bring the total new loans for 2024 to $12.62 billion.

He questioned the use of these funds, asking, “What have we done with all these loans, and what are we proposing to do with the new ones?”

Babalola called on the Nigerian government to take decisive action, recommending a model similar to former President Olusegun Obasanjo’s debt relief approach. He urged the government to negotiate for debt forgiveness or, at the very least, interest waivers on existing loans.

He outlined several steps for addressing the debt crisis, including:

• Investigating the amounts borrowed and how the funds were utilized.
• Reviving national oil refineries to cut down on refined oil imports.
• Reducing the cost of governance and focusing on infrastructure development.
• Using recovered corruption proceeds for debt repayment.
• Promoting agriculture to diversify the economy away from a reliance on oil and politics.

Babalola concluded by noting that while Nigeria faces severe economic challenges, there is still hope for recovery, provided there is political will to implement these reforms.