Nigeria Must Prioritise Domestic Resources for Growth, Finance Minister Warns
Finance Minister Wale Edun has called for Nigeria to rely on domestic resources rather than external financing for sustainable economic development, as the government's macroeconomic reforms begin showing positive results.
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Nigeria's Finance Minister Wale Edun has urged the country to prioritise domestic resource mobilisation as the foundation for sustainable economic growth, signalling a potential shift in the nation's development financing strategy. The call comes as Africa's largest economy continues implementing controversial macroeconomic reforms aimed at stabilising the currency and attracting investment.
Speaking recently, Edun emphasised that Nigeria's economic future depends on harnessing internal resources rather than relying heavily on external borrowing or foreign aid. "The country's macroeconomic reforms had begun yielding results," according to statements reported by Peoples Gazette, suggesting government confidence in the policy direction despite widespread public criticism of rising living costs.
Reform Programme Shows Early Results
The minister's comments reflect the administration's assessment that reforms implemented since President Bola Tinubu took office in May 2023 are beginning to stabilise Nigeria's economy. These measures have included the removal of petrol subsidies, which previously cost the government approximately ₦4 trillion annually, and the unification of multiple exchange rates that created arbitrage opportunities and depleted foreign reserves.
Nigeria's external debt stood at $42.9 billion as of September 2024, according to the Debt Management Office, whilst domestic debt reached ₦71.2 trillion. The debt service-to-revenue ratio has remained a concern for international financial institutions, with the International Monetary Fund noting that Nigeria spent approximately 96% of federal government revenue on debt servicing in 2023 before the reforms.
The emphasis on domestic resources aligns with broader African Union initiatives encouraging member states to reduce dependency on external financing. The African Union's Agenda 2063 framework advocates for resource mobilisation through improved tax collection, combating illicit financial flows, and developing domestic capital markets.
Tax Revenue Challenges Persist
Nigeria's tax-to-GDP ratio remains among the lowest globally at approximately 10.8%, according to recent National Bureau of Statistics data, compared to the African average of 16.5% and the OECD average of 34%. This low collection rate has historically forced successive governments to rely on oil revenues and external borrowing to fund budget deficits.
The Federal Inland Revenue Service has intensified efforts to expand the tax base and improve compliance, targeting the informal sector that accounts for an estimated 65% of economic activity. However, implementation faces resistance from businesses and citizens already struggling with inflation that reached 34.8% in December 2024, according to official statistics.
Domestic resource mobilisation extends beyond taxation to include developing local capital markets, attracting diaspora remittances estimated at $20 billion annually, and maximising revenues from natural resources beyond crude oil. Nigeria possesses significant untapped mineral resources including gold, lithium, and zinc that could diversify revenue streams.
Regional Context and Implementation Challenges
The push for domestic resource reliance mirrors strategies adopted by other African economies seeking to reduce vulnerability to external shocks and conditionalities attached to foreign loans. Rwanda and Ethiopia have implemented similar approaches, focusing on domestic revenue mobilisation and strategic use of limited external borrowing for infrastructure projects with clear economic returns.
However, Nigeria faces unique challenges given its population of over 220 million, widespread poverty affecting approximately 40% of citizens according to World Bank estimates, and infrastructure deficits requiring an estimated $100 billion annually in investment. Critics argue that domestic resources alone cannot address these gaps in the short to medium term.
The success of Edun's vision will depend on the government's ability to improve revenue collection efficiency, reduce corruption that diverts public funds, and create an enabling environment for private sector investment. As Nigeria approaches the 2027 elections, the political sustainability of reforms that impose short-term hardship for promised long-term gains remains uncertain, with opposition parties already criticising the economic direction.
International financial institutions including the World Bank and IMF have generally supported Nigeria's reform trajectory whilst acknowledging the social costs, emphasising the need for targeted interventions to protect vulnerable populations during the transition period.