Nigeria’s journey from colonial rule to independence in 1960 marked a turning point in its political history. The nation reclaimed its sovereignty, envisioned self-determination, and sought to build its future free from external control. However, more than six decades later, Nigeria faces a different kind of constraint—one that is less visible but equally restrictive. No longer chained by colonial masters, the country now grapples with the burden of foreign debt, tough repayment conditions, and increasing reliance on external assistance. This situation, often described as the “slavery paradox,” reveals the irony of a politically independent nation whose economic decisions are heavily influenced—if not dictated—by international creditors and financial institutions.
In this modern version of subjugation, creditors replace colonizers, and fiscal dependence replaces direct rule. While there are no occupying powers on Nigerian soil, stringent loan conditions, growing debt obligations, and a shrinking fiscal space have effectively constrained national autonomy. This dilemma highlights the urgent need for Nigeria to rethink its economic strategy and chart a path toward self-reliance.
The Debt Trap: An Alarming Fiscal Landscape
Recent fiscal indicators underscore the magnitude of the crisis. As of September 2024, Nigeria’s external debt had reached an unprecedented $43 billion—the highest since the country secured debt relief in 2006. That milestone, achieved after years of negotiation with the Paris Club and multilateral institutions, was supposed to offer Nigeria a fresh start. Yet, nearly two decades later, the country finds itself entangled in another round of unsustainable borrowing.
The 2025 national budget reveals a troubling picture: ₦14.3 trillion has been earmarked for debt servicing. This massive allocation dwarfs capital expenditure and highlights the trade-offs the government must make—foregoing investments in infrastructure, healthcare, and education just to meet repayment obligations.
Even more striking, in January 2025, the entire ₦696 billion disbursed by the federal government went solely to debt servicing, with nothing left for capital projects. This imbalance is not only alarming but unsustainable, as it crowds out essential investments that could foster economic growth and improve the welfare of citizens.
Currency Depreciation Deepens the Strain
Compounding the debt crisis is the depreciation of the naira. Although Nigeria fully repaid the principal on a $3.4 billion International Monetary Fund (IMF) loan in April 2025, the weakening currency has dramatically inflated the cost of repaying foreign-denominated loans in local terms. What should be a sign of fiscal responsibility—the completion of IMF loan repayment—has become a source of additional strain, as the naira’s decline means more naira must be spent to service the same dollar obligations.
In 2024 alone, external debt servicing costs surged to $4.66 billion from $3.5 billion in 2023, with multilateral institutions accounting for a large share. These figures underscore how foreign debt, rather than serving as a catalyst for development, has increasingly become a burden that hampers progress.
The Missed Opportunity of Debt-Financed Growth
In theory, borrowing can spur economic growth if directed toward productive sectors that generate returns. But in Nigeria’s case, borrowed funds have often failed to produce the transformative outcomes envisioned. Instead of catalyzing industrialisation or improving public services, much of the borrowed capital has been lost to mismanagement, inefficiency, or outright corruption.
The current borrowing model lacks the strategic foresight needed to ensure debt sustainability. When loans are not tied to measurable returns—such as revenue-generating infrastructure or export-enhancing industries—they become fiscal liabilities rather than developmental tools.
The result is a vicious cycle: the government borrows to fill budget gaps, then diverts a growing portion of its revenue to debt servicing, thereby reducing its capacity to invest in the very sectors that could strengthen the economy and reduce the need for future borrowing.
The Economic Fallout: Low Growth, High Inflation, and Diminished Welfare
Nigeria’s sluggish economic performance mirrors the consequences of its debt-dependence. While the Central Bank of Nigeria (CBN) projects GDP growth of 4.1 percent in 2025, the World Bank forecasts a more modest 3.6 percent, citing persistent structural bottlenecks and the drag of high debt servicing. These projections, even if realised, fall short of the growth levels needed to reduce poverty, create jobs, and improve living standards in a country with a rapidly growing population.
At the same time, inflation—particularly in food and energy—continues to erode household purchasing power. As basic goods become more expensive, millions of Nigerians face rising hardship, and the benefits of any debt-financed development are neutralised by the daily struggle to survive.
This economic stagnation, combined with worsening inequality, mirrors the exploitative economic patterns of the colonial and slave eras, where the wealth generated locally was siphoned away to serve external interests. Today, instead of slave traders or colonial companies, the siphoning happens through debt repayments to foreign creditors.
Charting a Way Forward: Breaking the Cycle
To escape this modern-day economic bondage, Nigeria must pursue bold, transformative reforms. The following five strategies could offer a sustainable path out of the slavery paradox:
-
Domestic Resource Mobilisation:
The government must prioritise boosting internal revenue. This includes expanding the tax base, improving tax collection efficiency, and curbing illicit financial flows. Nigeria loses billions annually to tax evasion and capital flight—resources that, if retained, could reduce the need for external borrowing. -
Strategic Borrowing:
Borrowing should be limited to projects with clearly defined and measurable economic benefits. Infrastructure, agriculture, energy, and technology sectors hold the most promise for generating revenue and stimulating long-term growth. Loans tied to such projects can become self-financing rather than burdensome. -
Transparency and Accountability:
Every step in the loan process—from negotiation to disbursement and usage—must be transparent. Regular public reporting, legislative oversight, and independent audits will ensure that borrowed funds serve public interests, not private pockets. -
Debt Restructuring and Renegotiation:
Nigeria should engage its creditors in meaningful renegotiations to secure more favourable repayment terms. This could include extending loan maturities, lowering interest rates, or obtaining partial debt forgiveness to create fiscal breathing room for essential development spending. -
Human Capital Investment:
No economy can thrive without an educated, healthy, and skilled population. The government must invest in education, healthcare, and vocational training to build a productive workforce that drives innovation and attracts investment.
The Road to Economic Sovereignty
Breaking free from economic dependence requires more than cutting debt—it demands a wholesale transformation of Nigeria’s fiscal mindset. The promise of independence, fought for decades ago, cannot be truly fulfilled unless Nigeria reclaims control over its economic future. That means making smart, transparent, and strategic choices about borrowing, revenue generation, and development priorities.
For millions of Nigerians, the slavery paradox is not a theory but a lived reality. The country must now choose whether to remain trapped in a cycle of dependence or rise to the challenge of building a resilient, self-sustaining economy. The path forward will not be easy, but with political will, strategic reforms, and national unity, Nigeria can finally deliver on the promise of independence—for this generation and the next.
