Why borrowing has not delivered growth, By Okelue David Ugwunta

Unproductive debt must not define Africa’s destiny. Rwanda, South Korea, Singapore, and China show that debt, when anchored in discipline, vision, and strong institutions, can fuel transformation. For Nigeria and its peers, the debt paradox is not just fiscal, it is systemic. The task is clear: close governance and strategy gaps, turn liabilities into productivity, inclusive growth and lasting prosperity.

Africa’s mounting debt crisis reveals a troubling paradox: A continent rich in natural wealth yet burdened by rising liabilities, infrastructure gaps, persistent poverty, and weak institutions. From Ghana’s prolonged debt distress to Nigeria’s liabilities that’s consuming 75 per cent of its revenue, alongside $24.14 billion in external borrowing, the pattern is clear: borrowing without transformation. In contrast, Rwanda has deployed debt more strategically, echoing Asian success stories like South Korea, Singapore, and China, where disciplined investment turned liabilities into engines of growth. Although Rwanda’s debt-to-GDP ratio surged from 20 per cent in 2010 to over 80 per cent in 2025, triggering a Fitch downgrade, its borrowings have been capitalised into infrastructure, health, and technology, anchored by long-term planning and relatively strong governance. The contrast is stark: While African giants struggle with rising debt and limited returns, Rwanda and Asia demonstrate that, under the right conditions, debt can drive growth. The central question for Africa is no longer whether to borrow, but why decades of borrowing have failed to deliver sustained prosperity, and what lessons can be drawn to rewrite the continent’s debt path, in line with productivity.

Public Debt versus Growth Productivity: Africa versus Asia

The “Debt Productivity Index” (DPI), an analytical construct using debt-to-GDP and GDP per capita growth, captures the correlation between debt and productivity.

Nigeria’s debt-to-GDP ratio rose from 39.1 per cent in 1989 to 56.6 per cent in 1990, then declined to 39.4 per cent in Q1 2025 after GDP rebasing. Yet, Nigeria’s DPI has steadily declined, mirroring Ghana’s trajectory despite Ghana’s debt-to-GDP peaking above 80 per cent in the mid-2010s and again between 2023 and 2024. Rwanda’s debt-to-GDP rose from 20 per cent in 2010 to over 80 per cent in 2025, but its DPI shows a corresponding positive increase. This mirrors patterns in South Korea, Singapore, and China. For example, South Korea’s debt-to-GDP is forecast to reach 53.6 per cent by 2028, China’s to 110 per cent by 2029, and Singapore’s to 175 per cent in 2025. These countries demonstrate that rising debt, when tied to productivity, can yield transformative outcomes.

Africa’s paradox is multifaceted: resource-rich yet fiscally distressed, attracting financial inflows but suffering from a debt overhang. The continent faces power shortages, food insecurity, and illicit financial flows exceeding $89 billion annually. Debt servicing diverts funds from health, education, and infrastructure, undermining human capital and deterring investment.

Africa’s Debt Landscape

Over the past 15 years, Africa’s debt has surged. The Sub-Saharan Africa median debt-to-GDP ratio reached 60 per cent in 2025 — double the 30 per cent recorded in 2010. Nigeria’s 2025 ratio of 45 per cent sits below the continental average, while Ghana’s exceeds 80 per cent. Sudan remains in chronic debt distress, unable to regain international creditworthiness.

Africa’s debt structure is increasingly dependent on external borrowing — Eurobonds and bilateral loans from China. Domestic debt markets remain shallow, constrained by weak savings and fragile financial systems. Global shocks, commodity price volatility, and interest rate hikes have pushed many African countries into unsustainable debt service positions.

The Debt Paradox in Africa: Rwanda as an Outlier

Africa’s paradox is multifaceted: resource-rich yet fiscally distressed, attracting financial inflows but suffering from a debt overhang. The continent faces power shortages, food insecurity, and illicit financial flows exceeding $89 billion annually. Debt servicing diverts funds from health, education, and infrastructure, undermining human capital and deterring investment.

Rwanda stands apart. Its long-term plans, such as Vision 2050, focus on productivity-enhancing investments in transport, ICT, and health. Stronger governance and alignment with donors and multilaterals rationalise its debt-to-GDP climb to over 80 per cent in 2025. While not risk-free, Rwanda’s debt strategy shows that high debt can support transformation if well managed.

…African borrowing has often been reactive, fragmented, consumption-driven, and applied to politically motivated projects, rather than productivity multipliers. Weak institutions and corruption crowd out the fiscal space, trapping governments in cycles of refinancing without growth.

Africa vs Asia: What Went Wrong?

Asian economies once faced similar savings gaps. South Korea’s economic miracle was driven by heavy borrowing tied to industrial policy, mass education, and export-oriented manufacturing. Singapore’s borrowing between 1970 and 1990 funded world-class infrastructure and human capital. China’s 1978 reforms leveraged debt to finance infrastructure and technology, lifting over 800 million people out of poverty. The common thread: long-term planning, institutional discipline, and strategic use of debt for development. In contrast, African borrowing has often been reactive, fragmented, consumption-driven, and applied to politically motivated projects, rather than productivity multipliers. Weak institutions and corruption crowd out the fiscal space, trapping governments in cycles of refinancing without growth.

Lessons for Nigeria and Africa

To escape perpetual fiscal fragility, Africa must go beyond debt restructuring. Key reforms include:

• Fiscal discipline and transparency: Align debt with credible development strategies and national priorities.
• Domestic revenue mobilisation: Tax reforms must reduce dependence on borrowing. In Nigeria, scepticism around the 2025 tax reforms fuels non-compliance, highlighting the need for public trust. This is because trust in governance is critical to long-term fiscal sustainability.
• Growth-enhancing investment: Debt must fund projects tied to measurable growth multipliers and long-term planning.
• Institutional strengthening: Democratic institutions must be fortified to eliminate inefficiencies and inconsistent borrowing.
• Governance and accountability: Prevent misuse of debt and ensure high returns on public investment.
• Strategic deployment: Debt must be a deliberate development tool — not a reactive deficit plug.

Unproductive debt must not define Africa’s destiny. Rwanda, South Korea, Singapore, and China show that debt, when anchored in discipline, vision, and strong institutions, can fuel transformation. For Nigeria and its peers, the debt paradox is not just fiscal, it is systemic. The task is clear: close governance and strategy gaps, turn liabilities into productivity, inclusive growth and lasting prosperity.

Okelue David Ugwunta is a Nigerian university lecturer and an economic planning specialist.

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