The clock is ticking on Nigeria’s fiscal reform. The country is currently grappling with a mounting debt crisis that presents significant challenges to its expenditures and investments. The escalating debt burden has profound implications, particularly for crucial sectors that require substantial investment. Insufficient allocation of resources to these sectors not only hampers Nigeria’s development but also jeopardises the well-being of its citizens, and failure to act quickly could result in an additional 23 million Nigerians living in poverty and 80 million working-age citizens without a full-time job by 2030.
The rapid increase in Nigeria’s public debt, especially external debt, has outpaced its revenue growth. Between 2014 and 2021, the country witnessed an alarming threefold rise in debt stocks, far exceeding the growth rate of its income. As a result, an overwhelming 91 per cent of government revenues in 2021 were allocated to debt servicing, leaving limited funds for critical sectors such as agriculture, health, and education. In the same year, a mere 2.6 per cent, 4.9 per cent, and 6.2 per cent of the government’s expenditures were allocated to these vital sectors, respectively, while a disproportionate 38.1 per cent was devoted to debt servicing. This imbalanced resource allocation impedes human capital development, hampers productivity, and perpetuates poverty and inequality.
At the same time, failure to invest adequately in critical sectors has far-reaching consequences for Nigeria and its people. Insufficient funding for agriculture, for example, restricts the country’s ability to achieve food security, support rural development, and stimulate economic growth. Inadequate investment in healthcare results in a weakened healthcare system, limited access to quality healthcare services, and increased vulnerability to disease outbreaks such as Lassa fever and the Covid-19 pandemic. Neglecting education leads to a lack of quality educational opportunities, hindering the development of a skilled workforce and constraining the country’s potential for innovation and economic advancement.
Ultimately, the consequences of underinvestment in these sectors diminish Nigeria’s ability to address socioeconomic challenges and improve the well-being of its citizens. According to the World Bank, Nigerian-born children currently face a higher risk of not surviving beyond the age of 5, and those who do survive only attain 36% of the potential productivity that could be achieved with full health and education. These concerning trends underscore the need for President Tinubu to urgently commit to fiscal reform and balanced resource allocation, thereby paving the way for significant investment in critical sectors that directly impact the lives of vulnerable Nigerians.
One part of the solution is to free up resources and redirect them towards critical sectors, but to do that, Nigeria must first prioritise fiscal discipline and prudent debt management. This involves drastically cutting waste in government expenditure, enhancing transparency, accountability, and effective monitoring of debt utilisation to ensure that borrowed funds are allocated judiciously to productive investments. Secondly, the country should explore opportunities to diversify its revenue base, such as reducing crude oil theft to boost oil revenues, implementing comprehensive tax reforms, improving tax administration, and attracting domestic and foreign investments. By plugging revenue leakages and generating additional revenue streams, Nigeria can reduce its reliance on debt financing, thereby freeing up resources for critical sector investments. Thirdly, the government should commit to using concessional sources for all debt and consider refinancing where possible to reduce the amount of debt service paid. Finally, President Tinubu should work with other African leaders to establish and advocate for common positions on reforms to the global financial architecture to ensure fair pricing of African debt and to unlock more concessionary sources of financing for sustainable development.
In order to address the pressing needs of agriculture, health, and education, the government must prioritise the allocation of funds to these sectors using most of the savings from the recently removed fuel and exchange rate subsidies. A greater proportion of the budget should be directed towards agriculture to close productivity gaps, strengthen market systems, promote rural development, and build resilience to adverse weather conditions. Adequate investment in healthcare, especially primary healthcare provision, is crucial to strengthening the healthcare system, expanding access to quality healthcare services, and improving health outcomes for all Nigerians. Similarly, prioritising education funding is essential for enhancing educational opportunities, fostering human capital development, and nurturing a skilled workforce to drive economic progress and innovation.
The urgency of the fiscal crisis demands our utmost attention, as the consequences of inaction are already apparent – 133 million Nigerians are multidimensionally poor. President Tinubu and State Governors must recognise the immense power they possess to shape the future of Nigeria through fiscal management and adequate investment in crucial sectors such as agriculture, health and education. The time to put that power to use for the good of all Nigerians is now.
Fatai is the Africa Policy Manager at The ONE Campaign and writes from Abuja.