by Olaitan Babatunde
If Nigeria needs more money, why doesn’t the government simply ask the Central Bank to print more naira? It sounds like an obvious solution until you remember that money is not the same thing as wealth. If a government suddenly doubles the amount of money in circulation but the country does not produce twice as much food, fuel, houses, electricity, transport and other goods and services, people are simply chasing the same things with more money. Prices can rise. The value of the currency can fall. So when you hear that the government is borrowing billions or trillions of naira, the natural question is not just, “Why are they borrowing?” It is also, “What would happen if they simply created the money instead?”
The first thing to understand is that governments do not borrow only because they have no money. Governments prepare budgets, and sometimes the amount they plan to spend is greater than the revenue they expect to collect from taxes, oil and other sources. That gap is called a fiscal deficit, and it has to be financed. Nigeria’s Debt Management Office says one of its responsibilities is to raise financing for government deficits through domestic and external borrowing, while keeping the costs and risks of that borrowing manageable. In practical terms, the government can borrow from investors in Nigeria, borrow from international lenders or issue securities such as Treasury Bills and Federal Government Bonds. When someone buys an FGN bond, they are essentially lending money to the government, which promises to pay interest and return the principal at maturity.
So why not just print the money? Because creating money can increase the amount of money chasing goods and services without increasing the supply of those goods and services. The Central Bank has explained that financing government deficits through money creation can become inflationary, particularly when the economy’s output does not grow alongside the increase in money supply. Imagine there are 100 bags of rice in a market and people collectively have ₦1 million to spend on them. If you suddenly give everyone another ₦1 million but the market still has only 100 bags of rice, you have not created more rice. You have created more purchasing power competing for the same supply. The seller now has more room to increase the price. That is a simplified example, but it explains why governments cannot treat money creation as a free source of wealth.
Borrowing works differently. When the Federal Government sells a bond, for example, money that already exists is transferred from investors to the government. The government can then use that money to finance its deficit or infrastructure projects and later repay the investors with interest. The DMO specifically describes FGN bonds as a way of financing deficits in a non inflationary and sustainable manner and reducing reliance on direct money creation. But borrowing is not free money either. Someone eventually has to repay the principal and interest. That repayment comes from future government revenue, which means money that could otherwise have gone to infrastructure, education, healthcare, security or other public services may have to be used for debt servicing. This is why the question should never stop at “How much did government borrow?” It should continue to “What was the money borrowed for, what did it achieve and how much will Nigerians ultimately pay to service it?”
This is where citizens have a role. Borrowing itself is not automatically good or bad. A government could borrow to finance infrastructure that improves productivity and generates economic value, or it could borrow to cover recurrent expenses without addressing the underlying revenue problem. The difference matters. Nigeria’s DMO publishes information on the country’s public debt, including domestic and external debt, while its debt management framework is designed around managing borrowing costs and risks. Citizens therefore have a simple accountability question to ask whenever another loan is announced: What are we borrowing for, how much will it cost to repay, and what will Nigerians have to show for it? The government cannot simply print its way out of every financial problem because money has value partly because it represents claims on real goods and services. Borrowing can give a government access to money today, but it creates an obligation for tomorrow. And whether that trade is worth making depends on what the borrowed money actually does for the country.
