Financial analysts have raised the alarm over Nigeria’s growing appetite for external borrowing, cautioning that the rising debt levels, which are largely unsupported by corresponding increases in sustainable revenue, could deepen the country’s fiscal vulnerabilities.

According to Cowry Research Asset Management Limited, the pace and scale of Nigeria’s loan acquisitions are becoming a source of concern, especially with global oil prices falling below budgetary benchmarks.

Since assuming office in May 2023, President Bola Tinubu’s administration has secured some external loans. While the government describes the funds as essential to socio-economic transformation, critics warn that the structure, utilisation and pace of the loans may pose long-term risks to economic stability.

The borrowed funds have been distributed across a series of development-focused programs $750 million for power sector recovery, $500 million for women’s empowerment, $800 million for social safety nets and $700 million to enhance adolescent girls’ education.

The most substantial tranche, $2.25 billion was secured in June 2024 to support macroeconomic stabilisation, including fiscal rebalancing and currency reforms.

Additional tranches of $1.57 billion and $632 million are scheduled for September 2024 and March 2025 respectively. They are earmarked for health, education, energy, nutrition and human capital development.

Despite the allocations, the analysts argue that a considerable portion of the loans is being used to fund recurrent and capital expenditures, rather than channeled into revenue-generating or self-sustaining initiatives.

This, they warned, could increase Nigeria’s dependence on debt without creating the fiscal buffers necessary to absorb future economic shocks. According to them, the concern is amplified by declining global oil prices, which recently dipped below Nigeria’s $75 per barrel budget benchmark. With oil revenues still accounting for a major share of government income, any sustained price slump could significantly undermine Nigeria’s ability to meet its debt obligations and fund public services.

Beyond revenue risks, there are also questions about the transparency and effectiveness of fund deployment. Without robust oversight, analysts warn, development-focused borrowing could become another avenue for inefficiency and fiscal leakage.

The structure of Nigeria’s debt portfolio adds another layer of complexity. The country’s liabilities remain heavily concentrated at the federal level and are marked by an imbalanced mix between external and domestic borrowings.

While Nigeria’s debt-to-GDP ratio is within the threshold prescribed by the Debt Management Office (DMO), the metric offers limited insight into real fiscal health, especially in light of ballooning debt servicing costs that continue to outpace revenue growth.

Also worrisome is the absence of a bold and coherent strategy to diversify the country’s revenue base. Efforts to expand non-oil income through taxation, customs reforms and industrial policy have so far yielded limited gains.

As a result, Nigeria remains caught in a precarious cycle of borrowing to finance expenditure, with limited capacity to generate internally driven fiscal momentum.

Ultimately, analysts stressed that while borrowing can serve as a tool for national development. It must be approached with caution, strategic foresight and institutional discipline, they said.

Without credible reforms to boost revenue, improve project implementation, and strengthen debt transparency, Nigeria risks trading short-term relief for long-term economic fragility.