Former Central Bank of Nigeria governor Muhammadu Sanusi II has sparked fresh debate over Nigeria’s fiscal direction, questioning why the Federal Government continues to accumulate debt despite the widely publicized savings from fuel subsidy removal.


Speaking amid growing concerns about the country’s economic stability, Sanusi’s blunt question — “Why are we still borrowing?” — cuts to the heart of Nigeria’s ongoing fiscal challenges. His remarks come at a time when many Nigerians had expected the removal of petrol subsidies to significantly ease government spending pressures and reduce reliance on borrowing.



Subsidy Removal: Expectations vs Reality


When President Bola Ahmed Tinubu announced the removal of fuel subsidies shortly after taking office in 2023, the policy was framed as a necessary step toward fiscal discipline. For years, Nigeria had spent trillions of naira annually subsidizing petrol, a system widely criticized for inefficiency, corruption, and disproportionate benefits to wealthier citizens.


The expectation was straightforward: eliminating the subsidy would free up substantial government revenue, reduce budget deficits, and ultimately curb the need for borrowing.


However, nearly a year after the policy shift, Nigeria’s debt profile continues to expand. According to official figures, the country’s public debt has kept rising, driven by persistent fiscal deficits, currency pressures, and increased spending obligations.


Sanusi’s Core Argument


Sanusi’s critique is not merely rhetorical — it reflects deeper concerns about fiscal transparency and policy execution. His argument centers on a key contradiction: if subsidy removal was meant to improve government finances, why has borrowing not slowed?


He suggests that either:


The expected savings are not being fully realized, or


The savings are being absorbed by other expenditures without meaningful fiscal consolidation



Sanusi has long been an advocate for disciplined economic management. During his tenure at the Central Bank of Nigeria, he frequently warned about unsustainable government spending and lack of accountability in public finance.


Where Is the Money Going?


Analysts point to several factors that may explain the continued borrowing:


1. Exchange Rate Pressures

The devaluation of the naira has significantly increased the cost of servicing external debt. Even if borrowing slows, the local currency value of existing debt continues to rise.


2. Revenue Shortfalls

Nigeria’s revenue-to-GDP ratio remains one of the lowest globally. Despite subsidy removal, government earnings have not increased enough to meet expenditure needs.


3. Rising Government Spending

Savings from subsidy removal may be offset by increased spending on infrastructure, security, and social interventions aimed at cushioning the impact of higher fuel prices.


4. Debt Servicing Burden

A large portion of government revenue is already tied up in servicing existing debt, leaving little room for fiscal flexibility.


Public Reaction and Economic Impact


Sanusi’s comments resonate strongly with a population grappling with the aftereffects of subsidy removal. Fuel prices have surged, triggering increases in transportation and food costs, and worsening the cost-of-living crisis.


For many Nigerians, the promise of subsidy removal was that short-term pain would lead to long-term fiscal stability and economic growth. The continued rise in debt, however, raises doubts about whether those benefits are materializing.


Calls for Greater Transparency


Economists and policy experts have echoed Sanusi’s concerns, calling for clearer accounting of subsidy savings and how they are being utilized. There is growing demand for the government to publish detailed reports showing:


Actual savings from subsidy removal


Allocation of those funds


Impact on deficit reduction



Without such transparency, skepticism is likely to deepen.


The Bigger Picture


Nigeria’s debt situation is not just about borrowing levels but about the structure of its economy. Heavy dependence on oil revenue, limited tax collection, and high recurrent expenditure continue to constrain fiscal sustainability.


Sanusi’s intervention serves as a reminder that policy reforms alone are not enough — their implementation and outcomes matter just as much.


Conclusion


The question posed by Muhammadu Sanusi II is both simple and profound. If subsidy removal was meant to reduce financial strain, the persistence of rising debt suggests deeper structural issues within Nigeria’s fiscal framework.


As the government under Bola Ahmed Tinubu continues to navigate economic reforms, the challenge will be to translate policy decisions into tangible fiscal improvements. Until then, Sanusi’s question — “Why are we still borrowing?” — is likely to remain at the center of Nigeria’s economic conversation.