Nigeria’s $26bn Debt Request: Risky Gamble on Growth amid Fiscal Fragility –Cowry Asset
Nigeria’s renewed external borrowing drive has continued to generate reactions, though the authority has claimed move to seek approval is in line with its medium term expenditure framework.
However, the ever rising appetite for loans, and the size of latest borrowing request reignited conversations around Nigeria’s fiscal sustainability.
In commentary note, experts at Cowry Asset Management Limited release by its research arm said request $26 billion in loan approval is a risky gamble on growth amidst fiscal fragility.
With a fast rising debt profile, the government appears to be treading a precarious path—one that may keep the country perched on a fiscal cliff, the investment firm said in a commentary note released.
Recently, President Bola Tinubu submitted a fresh request to the National Assembly, seeking approval for over $21.5 billion in external loans as part of the government’s 2025–2026 Borrowing Plan.
Analysts explained that the request is intended to plug financing gaps and support economic growth ambitions.
Alongside the $21.5 billion plan, the government is also pursuing additional borrowings amounting to €2.2 billion which is approximately $2.5 billion and 15 billion yen or $103.97 million from foreign sources.
These are in addition to $2 billion in naira-denominated debt from the domestic market.
In total, these new borrowings are expected to account for roughly 60% of the total spending outlined in the proposed 2025 budget, signalling a shift in strategy, according to Cowry Asset Limited.
“While the government had previously highlighted its intention to shift towards foreign direct investments (FDI) and attract equity investors in order to reduce reliance on debt, the latest borrowing plans appear to contrast sharply with that narrative—raising the cost of borrowing and placing increased pressure on fiscal stability”, the firm said.
According to official disclosures, the borrowing plan targets strategic sectors such as infrastructure, agriculture, health, education, water supply, security, financial and monetary reforms, as well as job creation and growth support.
It would be recalled that the proposed borrowing strategy is embedded within the broader Medium-Term Expenditure Framework (MTEF), in accordance with the Fiscal Responsibility Act (2007) and the Debt Management Office (DMO) Act (2003)
Nigeria’s total public debt stood at $94.23 billion or N144.67 trillion) as of December 2024, compared to $108.23 billion or N97.23 trillion a year earlier, recent data released by DMO revealed. Analysts said the apparent dollar decline was largely driven by the devaluation of the naira rather than actual reductions in debt levels.
External debt service alone stood at $4.66 billion in 2024, comprising $2.80 billion in principal repayments, $1.74 billion in interest payments, and $120.13 million in various charges such as fees and commissions.
Breaking this down by creditor groups, multilateral lenders received the largest share of repayments ($2.62 billion), followed by commercial lenders ($1.47 billion), while bilateral creditors accounted for $570.67 million.
The latter category often reflects higher concessional terms but also comes with elevated administrative and embedded costs, Cowry Asset Limited said.
The investment firm said since assuming office in May 2023, the Tinubu administration has already secured $7.2 billion in external loans—entirely from the World Bank.
“These funds have been channelled toward a mix of socio-economic projects, including $750 million for power sector recovery, $500 million for women empowerment, $800 million for social safety nets, and $700 million to support adolescent girls’ education.
“The largest tranche, $2.25 billion, was secured in June 2024 for economic stabilization efforts, including macroeconomic reforms and fiscal rebalancing. An additional $1.57 billion is scheduled for disbursement in September 2024 to fund health, education, and power projects, while $632 million is expected in March 2025 for nutrition and human capital development”.
Despite these well-intentioned allocations, Cowry Research notes that the government’s borrowing appetite remains a source of concern, particularly as a significant portion of the loans—both current and proposed—will go toward financing recurrent and capital expenditures without a corresponding increase in sustainable revenue streams.
It highlighted that the current decline in global oil prices below the $75 per barrel benchmark further clouds Nigeria’s revenue outlook, especially given the heavy reliance on oil for budgetary support.
“While the administration frames these loan programmes as catalysts for long-term development, serious questions remain around fund utilization, project outcomes, and overall fiscal transparency”, analysts said.
Without robust accountability and sustainability frameworks, even development-focused borrowing could compound Nigeria’s economic vulnerabilities, said the firm in its commentary note.
Analysts stated that the composition of Nigeria’s debt portfolio remains skewed, with a high concentration of liabilities at the federal level, and an imbalanced mix between external and domestic debts.
Although Nigeria’s debt-to-GDP ratio remains within the DMO’s prescribed threshold, the true fiscal threat lies in the country’s surging debt servicing costs and the absence of aggressive, diversified revenue strategies, Cowry Research explained.
Ultimately, Nigeria’s borrowing trajectory must be weighed against the country’s capacity to generate revenues, absorb new debt sustainably, and deliver economic returns that justify the rising cost of credit analysts maintained. #Nigeria’s $26bn Debt Request: Risky Gamble on Growth amid Fiscal Fragility –Cowry Asset# Ecobank Rises as Enhanced Financial Stability Attracts Investors
