Nigeria’s mounting public debt profile has triggered renewed concerns among economic experts, who are urging the Federal Government to reconsider its borrowing strategy amid fears that the country could face increasing fiscal constraints if the trend continues.
With public debt reaching N166.79 trillion as of June 2026 and the government pursuing legislative approval for an additional $21.7 billion in foreign loans, analysts have warned that the widening gap between government revenue and debt obligations poses a significant threat to economic stability and long-term development, according to TheSUN.
The experts described the country’s borrowing pattern as unsustainable relative to its revenue-generating capacity, warning that excessive dependence on loans could undermine fiscal sustainability and leave fewer resources available for critical development projects.
They maintained that the major concern is not necessarily an immediate threat of sovereign default, but the growing proportion of public revenue being consumed by debt servicing. According to them, this could gradually weaken the government’s capacity to fund infrastructure, provide essential public services, respond to economic emergencies and fulfil its obligations to citizens.
Figures released by the Debt Management Office (DMO) showed that Nigeria’s total public debt comprised N91.59 trillion in domestic liabilities and N75.20 trillion in external obligations. The two components accounted for 54.91 per cent and 45.09 per cent of the country’s overall debt portfolio, respectively.
Of particular concern is the acceleration in external borrowing, which rose by $2.6 billion on a quarter-on-quarter basis and $7.5 billion year-on-year to reach $54.5 billion in the second quarter of 2026.
The development comes as the Federal Government last week unveiled plans to secure $21.7 billion in additional external financing under its 2026–2027 borrowing framework. The proposed package consists of $20.5 billion and €1.0 billion in foreign loans, a move that could further increase the country’s exposure to foreign-currency-denominated debt if the facilities are fully accessed.
Although the government has defended the proposed borrowing as necessary to bridge the country’s infrastructure gap, stimulate economic activities and support development priorities, the size of the planned facilities has raised questions about Nigeria’s capacity to meet future repayment obligations without putting additional pressure on public finances.
The International Monetary Fund (IMF), in its June 2026 assessment, projected that interest payments alone would consume approximately 53.7 per cent of the Federal Government’s revenue in 2026, highlighting the increasing strain debt obligations are placing on available public resources.
This implies that a substantial share of government earnings will be committed to servicing existing loans rather than financing infrastructure, healthcare, education and other productive sectors. It also leaves the government with limited financial flexibility to protect households and businesses against unexpected economic disruptions.
Further concerns have emerged over the cost of the proposed borrowing. Finance Minister Taiwo Oyedele disclosed that approximately $7.9 billion of the proposed facilities would be sourced from multilateral and bilateral institutions, while the remaining $13.77 billion would be obtained through commercial financing arrangements.
Using projected interest rates of 2.3 per cent for concessional loans and 7.8 per cent for commercial facilities, the proposed borrowing could attract a weighted average interest rate of about 5.8 per cent. Should the entire programme be utilised, Nigeria could incur additional annual interest expenses estimated at $1.26 billion.
The financial implications are particularly significant given the country’s vulnerability to foreign-exchange movements. Since most external loans are denominated in currencies such as the dollar and euro, any further depreciation of the naira could substantially increase the amount required to service those obligations in local currency.
Nevertheless, the Federal Government has continued to defend its infrastructure-led borrowing strategy, arguing that investments in critical national projects will generate economic benefits capable of supporting future debt repayments.
Among the major projects identified by President Bola Tinubu are the Lagos-Calabar Coastal Highway, Sokoto-Badagry Superhighway, Trans-Sahara Superhighway, electricity transmission and distribution upgrades, as well as the modernisation of commercial ports.
The administration believes that these investments will improve transportation networks, lower the cost of moving goods and services, strengthen economic productivity, attract private-sector capital and advance its ambition of transforming Nigeria into a $1 trillion economy by 2030.
However, economic analysts who spoke to Daily Sun at the weekend argued that the success of the borrowing strategy would ultimately depend on the economic value generated by the projects being financed.
They noted that debt-funded infrastructure development could deliver substantial long-term benefits, provided the projects are selected based on clear economic priorities, executed transparently and delivered within approved budgets and timelines.
The Managing Director of Decof Investments Ltd, Moses Igbrude, warned that borrowing more money without addressing weaknesses in project execution, revenue generation and public-sector accountability could worsen the country’s fiscal position.
According to him, Nigeria’s debt difficulties are not limited to the increasing volume of outstanding obligations but are also rooted in inadequate revenue mobilisation, heavy dependence on crude oil earnings and the growing cost of interest payments.
“Nigeria’s debt challenge, therefore, extends beyond the size of its obligations. Weak revenue mobilisation, dependence on oil earnings and rising interest payments remain significant structural constraints.
Ultimately, the country risks entering a cycle in which additional borrowing is required to meet existing fiscal obligations, further narrowing the resources available for development. The government’s priority must be to ensure that every borrowed dollar translates into productive assets, stronger economic activity and sustainable revenue”, Igbrude said.
He further argued that the effectiveness of the country’s debt management strategy should be assessed by its ability to generate sufficient economic growth and revenue to repay accumulated obligations, rather than by the volume of loans secured from international creditors.
Igbrude maintained that Nigeria must build a productive economic base capable of sustaining its borrowing commitments without transferring an unsustainable financial burden to future generations.
Similarly, analysts at Cowry Research acknowledged that Nigeria’s infrastructure shortages provide a strong economic justification for additional investment but insisted that any new borrowing must be supported by stronger fiscal management, improved revenue collection and effective implementation of development projects.
“Without meaningful progress on these fronts, rising debt-service commitments, currency exposure and competition for domestic liquidity could further narrow fiscal space and complicate monetary policy management”, they said.
The investment and research firm also cautioned against interpreting the country’s rising debt stock as an immediate indication of insolvency, noting that the increasing concentration of foreign-currency obligations presents additional vulnerabilities for the economy.
The analysts explained that Nigeria’s ability to meet external debt repayments depends significantly on its capacity to generate foreign exchange, a situation complicated by the country’s continued reliance on crude oil exports as its dominant source of export earnings.
“Nigeria needs sufficient FX earnings to service its external obligations, but its export earnings remain heavily concentrated in crude oil. Consequently, fluctuations in international oil prices, production disruptions and exchange-rate pressures can complicate debt management.
First, revenue mobilisation must become a central component of the government’s economic strategy. Expanding the tax base, improving tax administration, reducing leakages and strengthening non-oil revenue generation are essential to reducing dependence on borrowing.
Also, the government must exercise greater discipline in project selection. Borrowed funds should prioritise projects with demonstrable economic returns, strong development linkages and the capacity to stimulate private-sector investment”, they said.
