Nigeria's borrowing surge sparks debate after fuel subsidy removal
The Emir of Kano, Muhammadu Sanusi II, has questioned why Nigeria continues to borrow heavily despite the removal of fuel subsidy, raising concerns over the country's fiscal direction.
Sanusi made this known on Friday during an interview aired on News Central TV, where he assessed Nigeria's economic reforms and fiscal policies.
While the former Governor of the Central Bank of Nigeria maintained that the subsidy regime was unsustainable, he questioned whether the timing of its removal was appropriate and whether supporting measures were in place before the policy was implemented.
Sanusi criticised Nigeria's past reliance on foreign refineries despite being an oil-producing nation, describing it as an unsustainable approach to energy management.
- "I have always said the subsidy regime was unsustainable. We cannot continue supporting foreign refineries. We're an oil-producing country. Keeping refineries open abroad while we're not doing our own," Sanusi said.
He pointed to improvements in local refining capacity, particularly the operations of the Dangote Refinery, noting that Nigeria is no longer heavily reliant on imported petroleum products, which he described as positive for the economy.
- "For me, removing subsidy or liberalising exchange rates, these are good interventions. Were they done at the right time? Those are certain questions. Were there other things that should be done that have not been done? These are other issues."
The monarch added that the impact of subsidy removal should already be evident in the economy nearly three years after the policy was introduced.
- "We've removed the subsidy. We're now spending it. What we should not see is fiscal consolidation. You cannot remove wastages and continue borrowing. I've said this before. You need to see the benefits.
- "If you're not paying the subsidy and you've got the money, why are we still borrowing and borrowing? What are we borrowing for?" Sanusi questioned.
Sanusi's comments come less than a year after he attributed Nigeria's current economic challenges to the long delay in removing fuel subsidy.
He explained that the subsidy system effectively forced the government to absorb price shocks from global oil and exchange rate fluctuations for years.
- "That was not a subsidy; it was the worst form of derivative, an open-ended hedge," he said at the Oxford Global Think Tank Leadership Conference.
Despite claims by the Chairman of the Senate Appropriation Committee, Solomon Adeola, that Nigeria is saving over N10 trillion annually from subsidy removal, borrowing by the administration of President Bola Tinubu has continued.
In early April, our facebook reported that the Federal Government increased its 2026 borrowing plan by N11.31 trillion, bringing total projected borrowing to N29.20 trillion.
Just recently, President Tinubu also wrote to the Nigerian Senate seeking approval for a $516,333,070 external loan to finance the proposed Sokoto-Badagry Super Highway.
This continued borrowing comes amid rising debt servicing costs. According to the Debt Management Office, total debt service rose to about N16 trillion in 2025, an increase of N2.98 trillion or 22.9% from N13.02 trillion recorded in 2024.
A breakdown shows that Federal Government bonds accounted for about N5.35 trillion, representing roughly 65% of total domestic interest payments.
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