UN Warns of Debt Crisis as Nigeria’s Borrowing Soars Toward ₦155 Trillion by 2025

 

The United Nations Conference on Trade and Development (UNCTAD) has raised concerns about the increasing debt burdens faced by developing nations, cautioning that the mounting financial obligations could cripple economic progress.

According to UNCTAD, external debt in developing countries reached a historic high of $11.4 trillion in 2023—equivalent to 99% of their total export earnings. Nigeria, in particular, is on a troubling trajectory, with its total debt expected to surpass ₦155 trillion by 2025 as the government plans to borrow an additional ₦13 trillion to bridge budget deficits.

As of September 30, 2024, Nigeria’s debt had already climbed to ₦142.3 trillion, according to data from the Debt Management Office (DMO). More alarming is the country’s debt-to-revenue ratio, which currently stands at 65%, highlighting the immense pressure on government finances.

Debt Over Development: The Hard Choices Facing Nigeria

UNCTAD has warned that instead of channeling resources into critical areas such as infrastructure, education, and healthcare, many governments are forced to make difficult financial decisions due to the weight of debt obligations. The crisis is not just a matter of numbers—it directly impacts human development.

The organization revealed that an estimated 3.3 billion people worldwide live in countries where debt servicing costs exceed spending on either health or education. This stark reality underscores the devastating trade-offs that debt-strapped nations must make.

A Global Call for Reform

Speaking at the 14th International Debt Management Conference in Geneva, Switzerland, held from March 17 to 19, 2025, UNCTAD Secretary-General Rebeca Grynspan made an urgent plea for systemic financial reform to avert an escalating debt crisis that could hinder global progress.

“Behind us lies a system that needs reform; before us, the chance to build one that serves people and stability, long-term development, not recurring default,” she stated.

Grynspan emphasized that in most developing countries, interest payments now outstrip investments in climate initiatives, leaving them ill-equipped to tackle global challenges such as environmental sustainability.

“This forces countries to choose to default on their development in order not to default on their debt,” she added. “No more defaults on debt, but yes on development.”

Her statement sheds light on the paradox faced by developing economies: they are pressured to meet their debt obligations at the expense of national growth and human welfare. This dilemma demands urgent international collaboration to reshape the financial architecture in a way that prioritizes sustainable development over unsustainable debt cycles.

Can Nigeria Escape the Debt Trap?

As discussions intensify ahead of the 4th International Conference on Financing for Development later this year, the Geneva debt conference has set the stage for policy recommendations aimed at alleviating financial distress while ensuring long-term sustainability.

One of the key takeaways from the conference was the urgent need to reform global financial mechanisms so that debt serves as a tool for progress rather than an impediment. Nations must explore innovative financial models, debt restructuring plans, and economic policies that foster resilience instead of perpetuating dependency.

Nigeria’s debt challenge is not new. For years, the country devoted an overwhelming share of its revenue—at times as high as 97%—to debt servicing, severely constraining economic growth and limiting investments in infrastructure, healthcare, and education. However, under the current administration, some progress has been made in reducing the debt-to-revenue ratio from 97% to 65%.

Signs of Progress or a Temporary Relief?

According to the latest figures from the Central Bank of Nigeria (CBN), the country’s debt service payments saw a sharp decline from $540 million in January 2025 to $276 million in February 2025. This drop suggests that the federal government’s efforts to restructure its debt portfolio and stabilize dollar liquidity may be yielding results.

While this downward trend in debt servicing costs appears promising, skeptics argue that it could be a short-term fluctuation rather than a sustainable shift. The core challenge remains: how can Nigeria achieve economic growth without falling deeper into the debt trap?

Some experts believe that boosting local production, diversifying revenue sources, and reducing over-reliance on external borrowing are essential for long-term stability. Others argue that without significant global financial reforms, developing nations like Nigeria will continue to struggle under the weight of high-interest loans and unfavorable debt agreements.

The Debate: Borrowing for Growth or Borrowing into Crisis?

Nigeria’s rising debt levels ignite a crucial debate: Should the government continue borrowing to finance development projects, or should it adopt more conservative fiscal policies to curb its reliance on loans?

Proponents of borrowing argue that in a country with significant infrastructure deficits, strategic loans—if well-managed—can drive economic expansion, create jobs, and enhance competitiveness. However, critics warn that excessive borrowing without a clear repayment strategy could plunge Nigeria into a full-blown debt crisis, where future generations bear the burden of today’s financial decisions.

The question remains: Can Nigeria balance its borrowing strategy in a way that fosters growth without leading to financial distress? As the world watches, the country’s economic decisions in the coming years will determine whether it emerges stronger or remains trapped in an unsustainable debt cycle.

A Call for Thoughtful Action

The Nigerian government must take a bold but calculated approach to managing its debt crisis. Transparency in loan agreements, a focus on revenue generation, and effective economic policies will be crucial in charting a path forward. Meanwhile, global financial institutions must also play their part by offering fairer loan terms and supporting debt relief measures that enable developing nations to thrive rather than merely survive.

The road ahead is challenging, but with strategic reforms, Nigeria and other developing nations can turn their debt burdens into opportunities for sustainable growth and prosperity.