- New $6bn debt pushes liabilities above N155trn
- More debts, no solution to challenges
- Worry over debt usage and transparency
- Debt servicing costs a noose
A dangerous fiscal convergence is taking shape as rising debt, expanding deficits, and unresolved insecurity combine to test economic resilience in Nigeria, Africa’s fourth largest economy, with public debt projected to breach N155 trillion and move toward N200 trillion amid continued reliance on borrowing.
The federal government’s sustained reliance on borrowing to fund budget deficits, infrastructure projects, and legacy obligations remains central to this trajectory, even as analysts caution that debt accumulation is outpacing tangible gains in economic stability, growth, and national security.
The National Assembly’s recent approval of a $6 billion external loan request by President Bola Ahmed Tinubu marks the latest step in Nigeria’s expanding debt profile. The facility, equivalent to N8.4 trillion, is expected to push the country’s total public debt above N155 trillion, up from N146.7 trillion recorded at the end of 2025.
The approval process, concluded within hours, underscores what analysts describe as a pattern of accelerated legislative endorsement of borrowing requests, often with limited public scrutiny or detailed interrogation of project-specific allocations.
On the other hand, government officials have defended the borrowing strategy, citing the need to finance critical infrastructure, stabilise the macroeconomic environment, and sustain growth momentum. However, the scale and frequency of new debt issuances have intensified concerns over long-term sustainability and fiscal discipline.
Nigeria’s proposed 2026 budget, estimated at about N58.18 trillion, highlights the structural imbalance between revenue generation and expenditure commitments. With projected revenues of about N33–N34 trillion, the government currently faces a deficit ranging between N20 trillion and N23.8 trillion.
To bridge this gap, the government plans to raise N17.8 trillion in new borrowing, further embedding deficit financing as a central pillar of fiscal policy.
Debt servicing alone is projected to consume N15.9 trillion, accounting for nearly one-third of total expenditure. This growing allocation to debt obligations continues to crowd out spending on critical sectors such as security, health, and education, raising questions about fiscal prioritisation.
Nigeria’s debt expansion has been swift. When the current administration assumed office in May 2023, total public debt stood at about N87.38 trillion. By the first quarter of 2025, it had risen to N149.39 trillion, before rising further to N153.29 trillion by September 2025.
With the latest borrowing approval, total liabilities have now crossed the N155 trillion threshold, reflecting a sustained dependence on debt to finance both recurrent and capital expenditure.
Analysts warn that exchange rate volatility, additional borrowing approvals, and contingent liabilities could accelerate this trajectory, pushing debt levels closer to N200 trillion in the medium term.
The expanding debt burden comes against the backdrop of worsening insecurity across multiple regions of the country, raising concerns about the effectiveness of fiscal policy in addressing core governance challenges.
Violence continues to disrupt economic activity, displace communities, and dent investor confidence. In the North-East, insurgent attacks remain frequent, while the North-Central and North-West regions face communal violence, banditry, and kidnappings.
Recent incidents in Plateau State and other parts of the country have resulted in significant casualties and displacement, further highlighting the gap between fiscal expansion and improvements in national security outcomes.
Despite assurances from the presidency, including commitments to strengthen surveillance and deploy advanced security infrastructure, analysts say progress on the ground has been limited.
Fiscal expansion vs security spending
The juxtaposition of rapid borrowing approvals and slow responses to insecurity has drawn criticism from stakeholders, who argue that fiscal priorities may be misaligned with pressing national needs.
Rising debt servicing costs are constraining the government’s ability to invest adequately in security infrastructure, intelligence systems, and operational capacity. At the same time, inflationary pressures and rising living costs, partly linked to fiscal imbalances, are exacerbating social tensions and economic hardship.
This dynamic creates a feedback loop in which economic strain fuels insecurity, while insecurity undermines growth and revenue generation, further increasing reliance on borrowing.
Concerns over debt utilisation and transparency
Beyond the scale of borrowing, experts have raised concerns about the utilisation of funds and the lack of transparency surrounding debt-financed projects.
Sam Omale, president and chief executive officer of Rock Global Investment Network, warned that Nigeria risks accumulating debt without corresponding economic returns.
“The money that’s being borrowed is not being used for the purposes for which it is obtained. That creates a debt burden for generations yet to come,” he said.
Omale emphasised that borrowing should be tied to clearly defined, revenue-generating projects capable of servicing the associated debt, in line with global best practices in project finance.
He also highlighted the availability of alternative funding sources, including concessional financing such as Official Development Assistance (ODA), domestic revenue mobilisation, and innovative financing instruments.
“We are not exploring those sources adequately. Instead, we continue to rely on loans that may not deliver optimal value,” he added.
Other stakeholders have echoed similar concerns. David Adonri, executive vice chairman at Highcap Securities Limited, cautioned against excessive reliance on external borrowing.
“Financing an economy with external debt is a dangerous proposition because of the erratic flow of foreign income required to service those obligations,” he said.
Adonri argued that a greater share of borrowing should be denominated in local currency to reduce exposure to exchange rate risks.
Similarly, Lagos-based business executive Simon Tumba raised concerns about potential overlaps and inefficiencies in project financing.
“The government needs to be transparent about its borrowing plans and repayment structures. Without that, we risk accumulating debt without clear outcomes,” he noted.
The speed with which the National Assembly approved the latest $6 billion loan has further intensified debate over legislative oversight.
Analysts note that while critical reforms and governance-related bills often face prolonged deliberations, borrowing requests are frequently fast-tracked, raising questions about the depth of scrutiny applied to such decisions.
This pattern, they argue, undermines the role of the legislature as an independent oversight body and weakens accountability in fiscal governance.
Macroeconomic implications
Nigeria’s rising debt profile carries significant macroeconomic implications. Increased borrowing can support short-term growth and infrastructure development, but sustained reliance on debt without corresponding revenue expansion or productivity gains may lead to long-term vulnerabilities.
Key risks include:
- Debt sustainability concerns, particularly if revenue growth lags behind debt accumulation
- Exchange rate exposure, given the rising share of external debt
- Crowding out of private sector credit, as government borrowing absorbs available liquidity
- Reduced fiscal space, limiting the ability to respond to shocks
Moreover, high debt servicing costs reduce the government’s capacity to invest in growth-enhancing sectors, potentially slowing economic development over time.
Analysts broadly agree that borrowing, in itself, is not inherently problematic. When deployed effectively, debt can finance infrastructure, stimulate growth, and enhance productivity.
However, the current trajectory underscores the need for structural reforms aimed at improving fiscal discipline, enhancing transparency, and strengthening the link between borrowing and economic outcomes.
Key recommendations include:
- Strengthening project-based borrowing frameworks, ensuring that loans are tied to specific, revenue-generating investments
- Enhancing transparency and accountability, with clear reporting on loan utilisation and outcomes
- Diversifying funding sources, including concessional financing and domestic revenue mobilisation
- Improving expenditure efficiency, reducing waste and misallocation of resources
- Rebalancing fiscal priorities, with greater emphasis on security, social protection, and economic resilience.
A defining moment is unfolding in the fiscal landscape, where escalating debt and persistent insecurity are compounding longstanding structural weaknesses, demanding more deliberate policy choices.
While the government maintains that borrowing is necessary to support development and stabilise the economy, the growing disconnect between fiscal expansion and tangible improvements in citizens’ welfare underscores the urgency of reform.
Analysts maintain that without a shift toward more disciplined and transparent fiscal management, the country risks entrenching a cycle of rising debt and limited impact, where financial resources are consumed without delivering commensurate gains in growth, security, or living standards.
As discussions persist, it is increasingly evident that the sustainability of economic growth will be shaped less by borrowing volumes and more by the impact and efficiency of spending.
