Analysts at Cowry Asset Management Limited have called for stronger fiscal discipline and a renewed push to expand public revenues, warning that Nigeria’s rising debt profile could become a constraint on economic growth if not carefully managed.

The firm emphasised that improving revenue mobilisation through a broader tax base, enhanced compliance and increased non-oil earnings remains critical to maintaining fiscal stability, alongside more efficient and targeted public spending.

While recent reforms in revenue generation and the foreign exchange market signal progress, Cowry noted that sustaining these gains will be decisive in shaping the country’s fiscal outlook.

The analysts stressed that striking a balance between prudent borrowing, stronger revenue inflows, and disciplined expenditure will ultimately determine whether Nigeria’s debt remains sustainable.

Recall that Nigeria’s total public debt rose to N159.28 trillion, equivalent to about $110.98 billion, as of December 31, 2025, representing a 10.1 per cent increase from N144.67 trillion recorded at the end of 2024.

On a quarterly basis, the debt stock also rose by four per cent from N153.3 trillion as of September 2025, indicating a steady upward trajectory in government borrowing.

Beyond the headline figures, Cowry argued that the official debt stock does not fully capture the country’s total fiscal exposure, as quasi-fiscal liabilities, including AMCON obligations, power sector debts and contractor arrears, remain excluded, suggesting a broader and more complex debt burden.

An analysis of the debt structure shows a near-even split between domestic and external obligations.

Domestic debt accounts for N84.85 trillion, representing 53.27 per cent of the total, largely driven by Federal Government borrowings.

Although relatively accessible, this form of financing has become increasingly costly amid elevated interest rates, the analysis said.

External debt stood at N74.43 trillion, or 46.73 per cent, comprising multilateral, bilateral and commercial loans.

While concessional facilities from institutions such as the World Bank and the African Development Bank offer some relief through lower interest rates, commercial instruments such as Eurobonds entail higher costs and expose the country to global financial market risks.

Exchange rate volatility continues to amplify the naira value of external obligations, further intensifying repayment pressures.

Despite a debt-to-GDP ratio of about 30.8 per cent, which remains below the 60 per cent threshold outlined in the Medium-Term Debt Strategy, Cowry cautioned that this metric alone does not adequately capture debt sustainability risks.

“The more critical concern lies in the cost of servicing debt relative to government revenues. In 2025, domestic debt servicing rose to approximately N8.61 trillion, driven by high interest rates and frequent refinancing of short-term instruments at elevated yields.

“Federal Government bonds accounted for N5.49 trillion of the amount, while treasury bills contributed N2.55 trillion, with other instruments such as Sukuk, promissory notes, savings bonds and green bonds making up the remainder. External debt servicing was estimated at $5.15 billion, adding further strain on public finances,” it stated.