Sanusi questions Nigeria’s borrowing despite subsidy removal

Nigeria's fiscal paradox has drawn sharp criticism from one of Africa's most influential voices on economic policy. Muhammadu Sanusi II, the Emir of Kano and former Central Bank Governor, publicly questioned the logic of Nigeria's accelerating borrowing trajectory despite the government's landmark fuel subsidy removal in 2023—a reform that was explicitly designed to free up billions in state resources.

## Why is Nigeria still borrowing heavily after subsidy removal?

The question cuts to the heart of Nigeria's fiscal management puzzle. When President Bola Tinubu removed petrol subsidies in May 2023, the government projected savings of ₦4 trillion annually (approximately $5.2 billion USD). These freed resources were supposed to redirect toward infrastructure, healthcare, and debt reduction. Yet Nigeria's external debt has climbed to over $46 billion, while total debt exceeds ₦100 trillion. The disconnect between reform intention and fiscal outcome reveals structural governance challenges beyond any single policy intervention.

Sanusi's critique, aired on News Central TV, reflects growing investor anxiety about Nigeria's debt sustainability trajectory. The Central Bank's recent monetary tightening—with rates now above 27%—signals acute pressure on the fiscal framework. Despite subsidy removal's intended benefits, government spending has not contracted proportionally, suggesting either revenue collection failures or uncontrolled expenditure growth.

## What happened to the subsidy savings?

The projected fiscal windfall from subsidy removal appears partially absorbed by inflation, currency depreciation, and security-related spending. The naira's weakness against the dollar has inflated the naira-value of foreign debt servicing. Additionally, security challenges in the North—exactly Sanusi's region—have demanded increased military and humanitarian expenditure. The government's inability to convert subsidy removal gains into tangible fiscal consolidation reflects deeper institutional weaknesses in budget execution and tax collection efficiency.

Nigeria's tax-to-GDP ratio remains among Africa's lowest at roughly 6%, compared to regional peers like South Africa (28%) and Kenya (16%). This revenue gap forces reliance on borrowing to fund recurrent expenditure, creating a vicious cycle where debt servicing itself becomes unmanageable.

## What are the implications for investors?

The Emir's intervention carries weight because it signals elite consensus fatigue with incremental reforms. Nigeria's credit rating remains in junk territory (B- at S&P), and sustained borrowing without fiscal consolidation risks further downgrades. For equity investors, this translates to currency pressure on naira-denominated returns and elevated political risk around fiscal adjustment cycles. Fixed-income investors face duration risk as yields remain elevated and refinancing costs climb.

The broader implication: Nigeria's economic stabilization cannot rest on subsidy removal alone. Without parallel improvements in tax collection, expenditure discipline, and anti-corruption oversight, the borrowing trajectory will remain unsustainable. Sanusi's public criticism suggests even traditional power centers—historically aligned with government—are questioning the pace and adequacy of reform.

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