The Effect of Foreign Loans on Nigeria’s Economic Development

Abstract

This study examines the effect of foreign loans on Nigeria’s economic development between 2023 and 2025.This is period that is marked by too much debt service obligations, macroeconomic instability; as well as  currency volatility. The Marxist theory was adopted as the theoretical framework of analysis; as is seen to be significant in explaining the exploitative relationship and control the developing countries experience from the advanced countries; as well as the international financial institutions. The employment of the qualitative research design made the study to rely exclusively on secondary data which were sourced from government reports, multilateral institutions, and scholarly publications. Narrative and content analysis techniques were utilized to identify trends, patterns, and implications of external borrowing on short-term and long-term economic performance. The findings indicate that foreign loans provide a short-term stimulus by enhancing investment capacity in critical sectors such as infrastructure, power, health, and education. However, these benefits are often undermined by high debt servicing costs, exchange rate vulnerabilities, and inflationary pressures. In the long term, foreign borrowing can support sustainable development if accompanied by transparent governance, strong project-absorption capacity, and strategic allocation toward productive sectors. Comparative analysis of the Buhari (2015–2023) and Tinubu (2023–present) administrations reveals that, while gradual borrowing under Buhari allowed for fiscal adjustments, the accelerated foreign loan accumulation under Tinubu may exacerbate debt risks if not prudently managed. The study underscores the importance of fiscal prudence, effective debt management, and strategic deployment of borrowed funds to maximize developmental outcomes while minimizing economic dependency.