Nigeria Plans N17.89tn Borrowing in 2026 Amid Widening Budget Deficit and Weak Revenues
The Federal Government plans to borrow N17.89tn in 2026 to finance a growing budget deficit, as projected revenues fall significantly short of expenditure needs, according to the 2026 budget framework obtained from the Budget Office of the Federation.
The 2026 Abridged Budget Call Circular from the Ministry of Budget and Economic Planning shows that new borrowing will rise sharply from N10.42tn in 2025 to N17.89tn next year—a 72 per cent increase, or N7.46tn, amid rising concerns over debt servicing costs.
The borrowing surge reflects a larger fiscal deficit and a weakened revenue outlook, even as total expenditure is projected to dip slightly. The 2026 fiscal deficit is pegged at N20.12tn, up from N14.10tn approved for 2025, representing a 43 per cent year-on-year increase. Despite the nominal jump, the deficit-to-GDP ratio is expected to fall from 4.17 per cent in 2025 to 3.61 per cent in 2026, due to a higher projected GDP base, and is forecast to decline further to 3.24 per cent in 2027 and 1.92 per cent in 2028.
Revenue Shortfall Drives Heavier Borrowing
The government’s need for higher borrowing is largely due to declining revenue. Federal budget revenue, excluding retained earnings of government-owned enterprises, is projected to fall from N38.02tn in 2025 to N29.35tn in 2026, a drop of N8.67tn (23 per cent). Revenue is expected to recover modestly to N31.53tn in 2027 and N34.90tn in 2028. However, the projected recovery is insufficient to reduce dependence on debt in the near term.
The framework indicates that domestic borrowing will dominate next year’s financing, with N14.31tn (80 per cent) expected from local creditors and N3.58tn (20 per cent) from external sources. This pattern mirrors 2025, when 82 per cent of new loans came from domestic markets. Similar trends are projected through 2028, with the government planning to borrow a total of N54.91tn over three years—N43.92tn domestically and N10.98tn externally.
Year-on-year analysis shows borrowing rising from N17.89tn in 2026 to N21.18tn in 2027 (+18 per cent) before declining to N15.84tn in 2028 (-25 per cent).
Rising Debt Service Costs
Debt service obligations are also increasing. Payments are projected at N15.52tn in 2026, up from N13.94tn in 2025 (+11 per cent). The debt service-to-revenue ratio will surge from 34 per cent in 2025 to 45 per cent in 2026, meaning nearly half of government revenue will go toward debt servicing. The ratio is expected to peak at 53 per cent in 2027 before easing to 47 per cent in 2028.
Expenditure Trends
Total federal spending is projected to decline slightly from N54.99tn in 2025 to N54.46tn in 2026, but recurrent and debt-related expenditures continue to dominate. Recurrent non-debt spending is set to rise from N13.59tn to N15.27tn, including N8.36tn for personnel and N1.38tn for pensions. Other service-wide allocations, including national programmes, will increase from N1.06tn to N1.85tn.
Conversely, capital expenditure will fall from N26.19tn to N22.37tn in 2026, as ministries are instructed to roll over 70 per cent of 2025 allocations. Capital spending is projected to recover slightly to N23.28tn in 2027 before dropping to N21.26tn in 2028, leaving limited fiscal space for new infrastructure.
Other financing sources, such as privatisation proceeds and project-tied loans, remain small compared with borrowing. Privatisation receipts are projected at N189.16bn in 2026, rising to N486.54bn in 2028, while loans from multilateral and bilateral partners will fall from N3.36tn in 2025 to N556.66bn in 2028.
Experts Warn of Debt Sustainability Risks
Economists have raised concerns over Nigeria’s growing debt burden. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, warned that high deficits and debt levels risk creating a debt trap, undermining macroeconomic stability and exacerbating inflationary and exchange rate pressures.
Professor Adeola Adenikinju, President of the Nigerian Economic Society, said heavy domestic borrowing could crowd out the private sector, increase interest rates, and slow investment. He also questioned the quality of government spending, noting that late capital releases often hinder development outcomes.
Ikenna Ofoegbu, Programme Manager at the Sustainable Nigeria Programme, highlighted the intergenerational impact of borrowing, linking debt to climate disasters and lost infrastructure. “These debts, our children will have to inherit them,” he said, urging transparency and accountability in project management.
Experts stressed that borrowing can be beneficial if properly managed, but must be traceable, verifiable, and outcome-focused. “Debt can be a bridge to Nigeria’s future, not a burden,” said one analyst, calling for reforms to ensure fiscal responsibility, transparency, and long-term development impact.
