The International Monetary Fund (IMF) and financial analysts have expressed concern over Nigeria's rising public debt.

This comes as the federal government intends to increase its external borrowing efforts despite growing fiscal pressures and a precarious economic outlook.

In an email, analysts at Cowry Asset Management voiced their concerns about President Bola Tinubu's recent request for a $21.5 billion loan to the National Assembly, which forms part of a larger borrowing plan for 2025–2026 aimed at bridging funding shortfalls and spurring economic growth.

In addition to this request, the government is considering borrowing €2.2 billion ($2.5 billion), 15 billion yen ($104 million), and $2 billion domestically, totalling approximately $26 billion in fresh loan plans.

Cowry Research warned that around 60% of the anticipated spending will be covered through new borrowings, pointing out the increasing reliance on debt to finance the 2025 budget.

It added:

"This marks a concerning shift from earlier promises to reduce dependence on debt by focusing on foreign direct investment and equity financing."

Cowry analysts cautioned that a large portion of the funds is likely to finance recurring and capital expenditures with limited impact on generating long-term sustainable revenue.

The borrowing proposal targets sectors such as infrastructure, health, education, agriculture, and economic reforms, in line with Nigeria's Medium-Term Expenditure Framework and the Fiscal Responsibility Act.

The nation's national debt decreased from $108.23 billion to $94.23 billion, or N144.67 trillion, as of December 2024, according to data from the Debt Management Office (DMO). However, this decline was mainly due to the devaluation of the naira rather than actual repayments.

In 2024 alone, total external debt servicing amounted to $4.66 billion, which included $1.74 billion in interest payments and $2.8 billion in principal repayments. Multilateral creditors received the largest repayments ($2.62 billion), followed by commercial lenders ($1.47 billion) and bilateral lenders ($570.67 million), according to a breakdown by lender.

Despite the strain, since taking office in May 2023, the Tinubu administration has obtained $7.2 billion in external loans, all from the World Bank.

These comprise $750 million for the electricity industry, $800 million for social safety nets, and $2.25 billion for economic stabilisation. An additional $632 million is due by March 2025, with another $1.57 billion anticipated in September 2024.

The IMF warned that if left uncontrolled, public debt may exceed 100 per cent of global GDP by 2030, pointing out that debt is already increasing more quickly in economies that account for 80 per cent of global GDP in its most recent Fiscal Monitor blog post.

“Countries must reduce public debt and rebuild fiscal buffers with credible medium-term plans,” the IMF advised, stressing the importance of macroeconomic stability and targeted growth policies, stating, ‘Governments need to build trust, tax fairly, and spend wisely.’

Cowry Research highlighted the discrepancy between Nigeria's stagnating revenue growth and rising debt servicing costs, which is exacerbated by the fact that global oil prices have fallen below the benchmark of $75 per barrel.

“This exposes Nigeria to external shocks, given the country’s overdependence on oil revenues for budgetary support. There is an urgent need to strengthen accountability mechanisms, ensure proper fund utilisation, and pursue growth-friendly policies that attract investments, not just loans,” Cowry stated.