Financial analysts have expressed growing concern over Nigeria’s increasing reliance on external borrowing, warning that the rapid accumulation of debt without commensurate revenue growth could deepen the country’s fiscal vulnerabilities and compromise its long-term economic resilience.
According to Cowry Research Asset Management Limited, the pace at which Nigeria is securing new external loans is becoming unsustainable, particularly as global oil prices—a key revenue driver—dip below the nation’s budgetary benchmark of $75 per barrel.
Since assuming office in May 2023, the administration of President Bola Ahmed Tinubu has moved swiftly to secure several multilateral and bilateral loans. Government officials have framed these borrowings as essential to Nigeria’s socio-economic transformation, but experts caution that the structure, transparency, and utilisation of these loans remain major points of concern.
The breakdown of the funds shows wide distribution across sectors:
$750 million for power sector recovery
$500 million for women’s empowerment programmes
$800 million for social safety nets
$700 million to support adolescent girls’ education
The largest single tranche, $2.25 billion, was secured in June 2024 to support macroeconomic stabilization, currency reforms, and fiscal rebalancing
More loans—$1.57 billion in September 2024 and $632 million in March 2025—are already lined up, earmarked for sectors like health, education, energy, and nutrition.
Despite these seemingly noble objectives, Cowry analysts warn that a significant portion of the funds may end up supporting recurrent and capital expenditures, rather than being invested in revenue-generating projects that can repay the debt or stimulate long-term growth.
They argue that unless Nigeria urgently boosts non-oil revenues, the country could soon face serious difficulty meeting its debt obligations. A sustained drop in oil prices would only accelerate the fiscal stress, given that oil sales still contribute the lion’s share of government earnings.
Beyond revenue risks, analysts are also concerned about the transparency and governance mechanisms guiding loan deployment. Without robust oversight, funds intended for critical development sectors could be lost to inefficiency, corruption, or poor implementation.
“There needs to be a stronger link between borrowing and measurable outcomes,” the analysts said. “Otherwise, debt becomes just another way to plug short-term holes instead of building long-term value.”
Another troubling aspect is the structure of Nigeria’s debt portfolio. While the Debt Management Office (DMO) maintains that the country’s debt-to-GDP ratio remains within acceptable thresholds, experts say this metric doesn’t account for the rising cost of debt servicing, which is outpacing revenue growth.
They also point out that Nigeria’s public debt remains heavily federalised, and that the current mix between domestic and foreign loans creates exchange rate risks in the event of further naira depreciation. As more of the debt is dollar-denominated, the burden of repayment grows heavier with each slide in the local currency.
In addition, the absence of a coherent strategy to diversify Nigeria’s revenue base has left the country in a vicious cycle: borrowing to finance consumption without building the capacity to fund its development independently. Reforms in taxation, customs revenue, and industrial productivity have so far delivered only marginal gains.
“Nigeria must urgently scale up non-oil revenues and establish sustainable fiscal buffers,” the report advised. “This includes stronger enforcement of tax compliance, deeper export diversification, and incentives for private-sector driven growth.”
Ultimately, while borrowing can play a positive role in national development when tied to critical infrastructure or human capital investments, it must be handled with discipline, transparency, and strategic foresight, analysts warned.
“Without clear and credible reforms to raise domestic revenue, improve project execution, and ensure debt accountability, Nigeria risks trading short-term relief for long-term fragility,” the Cowry team concluded.
As Nigeria prepares to secure additional funding in the coming months, stakeholders are calling on the federal government to reassess its borrowing framework, align loan terms with performance benchmarks, and prioritise value-driven fiscal governance.
