“Debt” is an involved concept. The reasons for this vary as do the views of any number of persons one talks to on the matter.

At the most basic conversational level, one cannot ignore the fact that most scriptures look askance at the practice of creditors charging interest on their lending. Besides, once you clear the hurdle of how high the rate on a debt has to be before it is considered usurious, I am not too sure which of Shakespeare’s commentary on debt (much of which has entered into the street register on the subject) is the more trenchant. Shylock’s comeuppance? Or Polonius’ injunction that one should “Neither a borrower nor a lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry”?

Beyond these strictures, though, leverage has considerable advantages. At the macroeconomic level, countries borrow to boost their capacities: investing, through debt, in the development of their economies than they could have done with their relatively meagre resources. At the firm and personal level, much of this same relationship holds. Businesses borrow to retool existing plants in order that they may produce more units of the same product using the same amount of inputs or even lesser. They invest in new plants to boost production capacity and enjoy the gains from producing at increased scale.

At the same time, debt helps bring down the volatility of household spending — increasingly important to the outcome of economies. Smoothened consumer spending over business cycles mean firms can better plan their investment, mothballing or bringing on new capacity, as demand is expected to fall or rise.

Conceptually, there is thus nothing wrong with borrowing, for so long as the purposes for which the additional monies are spent, contribute to improving the borrower’s capacity to pay. Understandably, available measures of debt affordability, from the household debt-to-income ratio, through the firm’s leverage ratio, to the computation of a country’s debt-to-GDP ratio seek to make this connection between money borrowed and the borrower’s ability to pay back.

In Nigeria, however, this relationship has unravelled of late. On one hand, is the fact that our debt portfolio has been growing, even as the share of capital expenditure in the annual appropriation acts heads southwards. In other words, we may have been borrowing to meet daily spending needs. Without investing in the public and “soft” infrastructure that help grow the economy, the marginal cost of our national borrowing will eventually fall below the additional gain to the economy from any new such money. Remember, too that despite the size of our economy — Africa’s biggest — and if you back out crude oil receipts, government’s income has not grown by the same multiple.

Evidently, therefore, there is a problem with the economy. Unfortunately, this problem is not helped by trotting out the familiar numbers on our current debt-to-GDP ratio. While arguing recently that there might be no trigger point at which the relative size of this ratio becomes inimical to an economy, I was reminded that debts are serviced out of a nation’s income and not from its output growth.

Once, therefore, we disconnect our spectacular output growth from our equally unspectacular income levels, we stare a very serious problem in the face. With crude oil prices in the doldrums, government’s challenge is much more frightful than being unable to pay public sector workers. Indeed, we may have being borrowing against our much improved output numbers to pay this category of workers. The new worry, going forward, is that our debt becomes unsustainable, because no entity, country or person, services their debt from the size of their GDP or personal net worth. Loans, both the principal and interest components, are paid off income.

Ultimately, we may have to restructure these debts. But that would involve taking further steps to re-assure our creditors that we are better managers of the economy. In which case, we would have to cut down on our expenditure and/or raise new sources of income — including the new fuel tax. Right-sizing the public sector would then become almost inevitable. At which point, I worry that the resulting job losses might be more than a democratically elected government may be able to take, especially when we have been remiss on the construction of the public and “soft” infrastructure that could have provided a soft landing for those who end up losing their jobs.