Many people live in one country and never leave it, even when they have citizenship in an other country. In that case it is very likely they do not want to have a passport for the country they do not live. In fact, many people do not even have one passport.
And in some cases it might be prudent not to be able to prove citizenship, like when you may be forced to join their army, even when you do not speak the language and have no ties (other than one of your parents having been born there) to the country.
Not having a passport may not be enough to avoid military service, but not having applied for a passport might make a difference in some cases.