You have heard this your whole life. “There is no money.” Every president says it. Every governor says it. But here is what nobody ever asks: where does government money actually come from?
ASUU goes on strike, no money. Roads collapse, no money. NEPA, oh sorry, PHCN sorry whatever they call it now – cannot keep the lights on. no money. It has become the most repeated phrase in Nigerian public life.
But here is what nobody asks: where does government money actually come from? Not in a conspiracy theory way. In a boring, accounting, how does this actually work. Because the answer changes everything about how you understand what is happening to your money and Nigeria right now.
To get there, we need to make two stops first. America. And Japan. Stay with me, this comes back home.
Stop 1: America and the graph nobody talks about
Here is a graph that is well known inside the US Government Accounting Office but rarely makes the news. Look at it carefully. Not the individual numbers. Look at the pattern.
U.S. federal budget surplus / deficit as % of GDP (1930–2023)
Blue bars going up are surplus years when the government collected more than it spent. Red bars going down are deficit years. The shaded areas are recessions. times when the economy officially shrank. Now don’t look at the individual numbers. Look at the pattern.
Why?
Here is the part nobody explains properly
When the government runs a surplus, it is pulling more money out of the economy than it is putting back in. Every naira or dollar that the government collects in tax and does not spend is a naira that is no longer in someone’s pocket. Take enough pockets at once, and the whole economy slows down. The surplus of the late 1920s preceded the Great Depression. The Clinton surpluses of the late 1990s preceded the 2001 recession. Not once did a sustained surplus lead to long-term prosperity.
There is actually a mathematical law behind this. It is called the sectoral balances identity, and it says:
Government balance + Private sector balance + Foreign sector balance = 0. Always.
This is not a theory. It is accounting, the same double entry bookkeeping that every Nigerian business uses. If the government collects more than it spends, the private sector, you, and your employer, every business in Ikeja and Abuja and Aba must collectively run a deficit. The numbers must add up to zero. There is no other option.
The chart below makes this painfully visible.
U.S. sectoral balances as % of GDP (1980–2023)
See how they mirror each other? The government’s “debt” is by arithmetic someone else’s savings. This is not a political opinion. It is bookkeeping. Which means government deficits are not automatically bad. They are the mechanism by which money enters the private economy. And surpluses are the mechanism by which money gets taken out.
“The government’s debt is, by arithmetic, the private sector’s wealth.”
Stop 2: Japan the country that broke the rulebook
Japan has the highest debt in the world for any major economy. Its government debt is 263% of GDP. To put that in context, it owes more than two and a half times everything its entire economy produces in a year.
By the standard story, Japan should be in crisis. Markets should be demanding punishing interest rates. Inflation should be through the roof. The yen should have collapsed decades ago.
None of that happened.
Debt tripled. Interest rates collapsed to near zero. For three decades.
Why? Because Japan prints yen. It borrows in yen. It can never be forced to default on a yen debt, it can always create more yen to repay. Markets understand this. There is no default risk to price in. So they keep lending at near-zero rates regardless of how large the debt grows.
This is the core insight behind what economists call Modern Monetary Theory “MMT”. A government that issues its own currency and borrows in that currency faces no hard financial limit on spending. The real limit is inflation. If you spend beyond what the economy can actually produce, prices go up. But “running out of money” the way a household runs out of money? That cannot happen to a sovereign currency issuer. They print the money.
Now. Here is where Nigeria comes in. And here is where the story gets uncomfortable.
Nigeria: same theory, completely different reality
Nigeria prints the naira. Nigeria borrows mostly in naira. By the MMT logic, Nigeria should be fine. Spend what is needed, grow the economy, inflation is the only real limit.
So why is the CBN policy rate at 27%? Why did inflation almost at 30%? Why did the naira lose half its value in a single year? Why, If the government can print money, why does it keep saying there is no money?
Nigeria has been in deficit almost every year since 1981. The brief exception 2005 to 2007 happened because oil prices were at record highs and Nigeria got massive debt relief from the Paris Club. The surplus lasted three years. Then oil slowed, spending continued, and the deficit came right back.
Notice the difference from America’s chart. America’s deficits are a choice, a policy
debate. Nigeria’s deficits are structural. They are baked into how the government raises
money in the first place.
And that brings us to the real problem.
Nigeria’s actual crisis is not the deficit. It is what pays for it.
Where does the Nigerian government get its money? Not from you. Not mostly, anyway.
Nigeria’s revenue to GDP ratio is approximately 6%. For every ₦100 of economic activity in this country, the government collects ₦6. The United States collects about ₦17 of every ₦100. Kenya collects ₦18. Ghana collects ₦13. Even with all its well documented problems, Ghana taxes its economy three times harder than Nigeria does.
If not from taxes, then where? Oil. Almost entirely, oil. And here is where it gets alarming.
That line crossing 100% is not a chart error. In 2023, Nigeria spent more on debt repayments than it collected in total revenue. Not 90%. Not 95%. More than 100%. Every road, every school, every salary the federal government paid that year was borrowed money. The government was not governing. It was servicing debt and borrowing to do everything else.
This is not an MMT problem. This is a revenue problem. Nigeria does not collect enough taxes to fund a government. It sold oil instead of building a tax base. When oil is good, things look manageable. When oil is bad or when production drops because someone is stealing crude from a pipeline in the Delta or they are stealing it themselves, allegedly. the government has nothing to fall back on.
Why Nigeria cannot simply print its way out
Remember Japan 263% debt to GDP, near-zero interest rates for thirty years. Nigeria’s debt to GDP? About 40 to 52%. A fraction of Japan’s. On paper, Nigeria looks much safer.
And yet.
Nigeria’s debt to GDP is modest. Its interest rates are stratospheric. This is the exact opposite of Japan. Here is why.
Japan prints yen. But Japan does not need dollars to survive. Its industries produce the goods its people consume. Its exports earn foreign exchange. It is not dependent on importing fuel, medicine, and machinery priced in a currency it does not control.
Nigeria prints the naira. But Nigeria needs dollars. It imports refined fuel. It imports most of its industrial inputs. It earns dollars from oil but when oil production drops due to theft and underinvestment, those dollar earnings fall. When the naira weakens, everything imported gets more expensive. That causes inflation. That forces the CBN to raise rates. That makes borrowing more expensive. That makes the debt service burden heavier. That forces more borrowing.
This is the external constraint and it is the reason MMT works differently for Nigeria than for Japan or America. You can print naira. You cannot print dollars. And in an economy where dollars determine the price of almost everything that matters fuel, machinery, medicine, food inputs. that distinction is everything.
So what does this actually mean for you?
Nigeria is not broke because the government spent too much. Nigeria is broke because it never built a base be it tax or other. It sold only oil instead of building an economy. When oil prices are high, everything looks fine. When they fall or when production collapses because someone is vandalising pipelines in Niger Delta the government has nothing to fall back on.
The debt is not the problem. The debt service is. Nigeria’s borrowing would be entirely manageable if it had a larger revenue base to service it from. But with revenue at 6% of GDP, even moderate borrowing becomes a crisis.
The Tinubu administration’s 2023 moves ending the fuel subsidy, unifying the exchange rate were painful and, on balance, economically correct. But they are the beginning of a long road, not the end of one. Removing a subsidy that was consuming more money than it was worth does not, by itself, build a tax base or diversify an economy. It just stops one bleeding.
Nigeria is not broke because the government spent too much. It is broke because it never built other base aside oil.
The question is not whether Nigeria can print its way out of this. It can not without inflation eroding the naira further. The question is whether Nigeria can finally do the boring, unglamorous thing that every economy that ever escaped this trap had to do: widen the tax net, reduce import dependence, and stop treating oil revenue like a salary.
The graphs will tell us if it is working. In few years from now.
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