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Financial analysts have sounded the alarm over Nigeria’s increasing reliance on external borrowing, warning that the country’s growing debt levels could exacerbate fiscal vulnerabilities. According to Cowry Research Asset Management Limited, the rapid pace and scale of Nigeria’s loan acquisitions are becoming a source of concern, particularly with global oil prices falling below budgetary benchmarks.
Since taking office in May 2023, President Bola Tinubu’s administration has secured several external loans, citing the need for “socio-economic transformation.” However, critics argue that the structure, utilisation, and pace of these loans may pose long-term risks to economic stability.
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The borrowed funds have been allocated to various development-focused programs, including $750 million for power sector recovery, $500 million for women’s empowerment, and $800 million for social safety nets. A substantial $2.25 billion loan was secured in June 2024 to support macroeconomic stabilisation, including fiscal rebalancing and currency reforms.
However, analysts warn that a significant portion of the loans is being used to fund recurrent and capital expenditures rather than revenue-generating initiatives. This could increase Nigeria’s dependence on debt without creating fiscal buffers to absorb future economic shocks. As one analyst noted, “Without credible reforms to boost revenue, improve project implementation, and strengthen debt transparency, Nigeria risks trading short-term relief for long-term economic fragility.”
Analysts also question the transparency and effectiveness of fund deployment, warning that “development-focused borrowing could become another avenue for inefficiency and fiscal leakage.” The structure of Nigeria’s debt portfolio adds another layer of complexity, with the country’s liabilities heavily concentrated at the federal level and marked by an imbalanced mix between external and domestic borrowings.
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While Nigeria’s debt-to-GDP ratio is within the threshold prescribed by the Debt Management Office (DMO), analysts stress that this metric offers limited insight into real fiscal health. The absence of a bold and coherent strategy to diversify the country’s revenue base is also a concern, with efforts to expand non-oil income through taxation, customs reforms, and industrial policy yielding limited gains so far.
Ultimately, analysts emphasize that borrowing must be approached with caution, strategic foresight, and institutional discipline. As they caution, “Borrowing can serve as a tool for national development, but it must be done with caution and a clear plan for sustainability.
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Jonathan Nwokpor
