Reform fatigue sets in as N16trn debt service erodes gains of fuel subsidy removal —Analysts

NIGERIA’S fiscal stability is coming under renewed strain as the anticipated benefits of fuel subsidy removal are being overshadowed by a surging debt service burden.

Analysts warn that “reform fatigue” is beginning to take hold, with the country’s N16 trillion annual debt service payments undermining the fiscal space supposedly freed up by the 2023 subsidy removal policy.

The subsidy reform, designed to redirect funds toward infrastructure and social services, has instead coincided with higher inflation, rising poverty, and escalating living costs. With external debt servicing projected to rise to $5.2 billion in 2025, concerns are mounting about the sustainability of Nigeria’s economic recovery.

“Reform fatigue is undermining economic performance,” says Mr. Bismarck Rewane, Managing Director/CEO of Financial Derivatives Company Limited, in the August 8, 2025 edition of the Lagos Business School’s Executive Breakfast Session (LBS EBS). He noted that empirical evidence from other reforming economies shows that policy fatigue sets in after two years.

“The most notable examples of fatigue syndrome include Britain under Margaret Thatcher, Myanmar, and Moldova in Eastern Europe. Policymakers will most likely offer the citizens palliatives to calm the restiveness of the populace. Also, in some cases, the leaders succumb to political pressure and begin to reverse some of the reforms.

“Nigeria is exactly two years into the sweeping reform of 2023. The populace is getting restive and uncomfortable with the unintended consequences of the policies. The federal and state governments are holding the line but are showing some signs of economic backsliding,” he said.

Citing aviation as an example of policy reversal, Rewane pointed out that Nigeria’s 33 airports have only four viable ones. Instead of pursuing privatisation, several state governments are investing heavily in new airports and airlines. “Richard Branson once said, ‘If you want to be a millionaire, start with a billion dollars and launch a new airline,’” Rewane stated.

A draft copy of the Accelerated Stabilisation and Advancement Plan (ASAP) presented to President Bola Tinubu by Finance Minister Wale Edun in June 2023 projected fuel subsidy costs at N5.4 trillion in 2024, compared to N3.6 trillion in 2023. Yet, debt servicing in 2025 has been pegged at N16.3 trillion.

The shift from subsidy payments to debt obligations is a key concern for analysts.

“We still have challenges on the fiscal side because the highest-ranking item on the budget is debt service,” said Mr. Tilewa Adebajo, CEO of CFC Advisory, in an interview with Nigerian Tribune. “While we have resolved the subsidy problem, we have created another problem which is debt. Our debt has become unsustainable.

“We have a debt of close to N150 trillion and we’ve seen now N16 trillion a year on debt service, which is $10 billion—close to the same amount of the subsidies. So we have replaced subsidy with debt. Now that we’ve resolved the subsidy problem, we need to resolve this debt problem so that we can grow the economy on a sustainable basis,” the draft copy stated.

Adebajo recommended that the government sell assets to raise $30–50 billion to pay down debt while targeting 8 percent annual GDP growth to achieve meaningful progress.

Analysts at CardinalStone research had forecast Nigeria’s debt could hit N187.79 trillion by year-end, fueled by a $900 billion domestic dollar-denominated bond, increased Treasury Bills and bond issuance, and a $2.2 billion Eurobond.

According to Proshare, led by Femi Awoyemi, macroeconomic management has shown progress, but households face harsh conditions due to tight monetary policy and fiscal conservatism. The administration’s approach has been branded by some as driving Nigerians deeper into poverty—earning President Tinubu the nickname “T-pain”.

Oxfam Nigeria reports that over 83 million Nigerians live on less than N3,100 ($2) a day, driven largely by government policy choices.

Development worker Lade Bandele argued Nigeria should emulate China’s targeted growth and poverty reduction strategy. “Crucial to the Chinese strategy… is the need to stimulate industrialisation, expand income levels, and develop national policies with poverty reduction as the defining purpose,” he said. “This includes massive investments in education, healthcare, and infrastructure, opening up economic opportunities and creating jobs.”

China reduced extreme poverty from 90 percent of its population in 1970 to 0.7 percent in 2022, lifting 100 million rural residents out of poverty by 2020.

Bandele warned that “promising a future in which the seeds of hope cannot be seen is like carelessly pissing in the wind – the outcome is usually unpleasant for all.”

Two years into the Tinubu administration, inflation and a 70 percent depreciation of the naira have reduced real wages and per capita incomes. Rising insecurity has displaced 3.36 million people, mostly farmers, cutting food supply and increasing the cost of a healthy diet.

High interest rates, part of the Central Bank’s inflation control measures, have raised borrowing costs and slowed real sector lending.

Despite these challenges, Nigeria recorded consecutive GDP growth quarters in 2024, outperforming expectations. This was driven by targeted fiscal interventions, a sustained trade surplus, and oil prices averaging above $70 per barrel.

Growth has been uneven across sectors. Trade, finance, mining, ICT, real estate, manufacturing, and agriculture expanded significantly, attracting substantial foreign capital—finance ($1.65bn), trade ($532.1bn), manufacturing ($408.3bn), ICT ($238.7bn), and agriculture ($10.9bn).

In contrast, education, health, and transport lagged despite heavy public investment, underscoring the need for more purposeful structural reforms.

The administration’s first two years have been marked by bold reforms, supported by a cooperative legislature. Key bills include: Electricity Act (Amendment) 2024—aimed at decentralising power supply but hampered by tariff shortfalls; Student Loan Re-enactment Bill 2024 – offering interest-free loans to low-income students, though concerns remain over distribution ethics; Investment and Securities Act 2025 – modernising the capital market; Regional Development Commissions – addressing region-specific needs but facing funding challenges; National Economic Stabilisation and Recovery Act—targeting inflation control and investment attraction; Four Fiscal and Tax Reform Bills—seeking to broaden the tax base without stifling activity.

On day one, Tinubu removed the fuel subsidy—a move seen as fiscally prudent but inflationary. The administration also repaid a $3.4billion IMF loan in under two years, improving fiscal credibility.

However, critics say expectations remain unmet in prudent spending, reduced debt reliance, and translating investment promises into actual inflows.

While Nigeria’s economy shows resilience in parts, reform fatigue, high debt service, and public discontent threaten momentum. As Adebajo cautioned, without tackling the debt crisis, “Nigeria’s economy will struggle to achieve long-term stability and prosperity.”

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