Rate cut cheer fades as sovereign debt nears N158trn

•Borrowing surge rattles fiscal outlook

•Experts demand spending discipline, growth-focused borrowing

By Chinwendu Obienyi

The glow from Nigeria’s recent cautious interest rate cut is dimming fast as the country’s swelling debt burden raises tough questions about fiscal sustainability. With total public debt projected to edge close to N158 trillion by year-end, economists warn that the celebration over easing rates may be short-lived if borrowing continues at the current pace.

Latest figures from the Debt Management Office (DMO) show public debt climbed to N153.3 trillion in the third quarter of 2025, a 0.6 per cent rise from the previous quarter and 7.7 per cent higher than the same period last year. In dollar terms, the increase was steeper, with the debt stock hitting $103.9 billion, reflecting fresh foreign borrowings.

Part of the spike came from a $1.5 billion external loan secured during the quarter. Although the naira appreciated slightly, averaging N1,521.11 to the dollar, the stronger currency only softened the increase when converted to local terms. The underlying reality remains clear: Nigeria is borrowing more.

For many analysts, the concern is not just how much the country owes, but why it keeps borrowing. They argue that debt has shifted from being a temporary cushion to becoming a permanent pillar of government finance. As more revenue goes into servicing loans, less is available for roads, power projects, schools and hospitals.

An economic analyst, Blaise Udunze, believes the country must rethink its approach.

“The issue is no longer whether Nigeria can borrow but whether the country is borrowing to survive or borrowing to build as it has now become a permanent feature of Nigeria’s budget architecture,” he said during a televised interview.

The federal government shoulders most of the burden, accounting for over 95 per cent of domestic debt and nearly 90 per cent of external debt. Its total exposure stands at N141.9 trillion. Within the first nine months of 2025 alone, federal debt rose by N8.6 trillion.

Against federal revenue of N18.2 trillion in the same period, the additional borrowing represents nearly half of what the government earned. In practical terms, a large share of national spending is financed with loans.

Udunze warned that this trend is becoming entrenched. “Borrowing was once considered as a tool to manage what was going on but our concern today which is more troubling is the fact that it has now become a structural reality and has come to stay. Without borrowing, this country cannot forge ahead. The NASS is coming out to defend the N25.91 trillion deficit in the N58trn 2026 budget, meaning that as regards our revenue, what we can afford to raise is about N33.19 trillion if I am right. The country needs to urgently checkmate its borrowing and the dependency on oil revenues is actually not helping,” he stated.

Investment research firm Afrinvest projects that public debt could close the year between N155.6 trillion and N158 trillion.

The estimate reflects a $2.25 billion Eurobond issued in November and roughly N4.7 trillion raised through Treasury Bills in the final quarter of 2025.

Still, Afrinvest maintains that borrowing in itself is not the enemy. What matters most is how the funds are used. “The critical issue is whether borrowed funds are channeled into value-generating capital expenditure capable of expanding the productive base of the economy.

“We therefore reiterate our position that borrowing should be strategically deployed toward growth-enhancing investments, while governments at all levels strengthen internal revenue mobilisation, leverage areas of comparative economic advantage, and avoid excessive debt accumulation that could heighten medium-term fiscal vulnerability,” the firm said.

Cowry Research shares similar concerns. It estimates that total public debt will rise to about N154.36 trillion in the fourth quarter of 2025, equivalent to roughly 35.4 per cent of Gross Domestic Product (GDP). While that ratio may appear moderate by global standards, analysts stress that Nigeria’s real pressure point is its debt-to-revenue ratio, which remains high.

At the state level, borrowing trends are mixed. States like Enugu and Borno recorded noticeable increases in domestic debt, while Kogi and Katsina reduced theirs. Even so, state debts pale in comparison to federal obligations.

To steady the ship, experts recommend firm control of recurrent spending, aggressive expansion of non-oil revenue sources, and strict alignment of new borrowing with productive investments in infrastructure, industrial growth and human capital. Without these guardrails, they caution, rising debt could overshadow any gains from monetary easing and deepen Nigeria’s fiscal strain.