FG to Borrow N17.89trn in 2026 as Budget Deficit Widens, Revenue Drops
- The federal government plans to borrow N17.89 trillion in 2026 due to a wider fiscal deficit and lower revenue projections
- Domestic borrowing will account for 80% of the government’s loan plan, while Debt service costs are expected to rise sharply
- Economists and civil society experts warned that rising debt could undermine macroeconomic stability and burden future generations
Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, tech and macroeconomic trends in Nigeria.
The federal government is proposing to borrow N17.89 trillion in 2026 to cover a growing budget deficit, according to the 2026 budget framework released by the Budget Office of the Federation.
The borrowing plan reflects a sharp drop in expected revenue and a wider fiscal gap despite slightly lower overall spending, PUNCH reported.
According to the Abridged Budget Call Circular issued by the Federal Ministry of Budget and Economic Planning, new borrowing is projected to rise from N10.42 trillion in 2025 to N17.89 trillion in 2026. This represents a 72% increase in fresh loans within one year.
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The budget document shows that the fiscal deficit is expected to rise to N20.12 trillion in 2026, up from the N14.10 trillion approved for 2025. Although the nominal deficit is expanding, the deficit-to-GDP ratio is projected to decline to 3.61% from 4.17% in 2025 due to a higher GDP forecast. The ratio is expected to fall further to 3.24% in 2027 and 1.92% in 2028.
Government revenue available for federal spending, excluding earnings from government-owned enterprises, is forecast to fall from N38.02 trillion in 2025 to N29.35 trillion in 2026. The 23% drop is a major factor behind the increased reliance on debt.
Revenue is projected to rise moderately to N31.53 trillion in 2027 and N34.90 trillion in 2028, but the expected gains are not strong enough to significantly reduce borrowing needs in the medium term.
The framework shows that domestic borrowing will continue to dominate government financing. Of the N17.89 trillion planned for 2026, N14.31 trillion (about 80%) will be sourced locally, while N3.58 trillion will come from external lenders.
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The pattern remains consistent with 2025 projections, when domestic loans account for 82% of planned borrowing. Similar ratios are anticipated in 2027 and 2028. Over the three-year period from 2026 to 2028, the government expects to borrow a total of N54.91 trillion, with domestic creditors providing 80% of the amount.
Borrowing is projected to rise to N21.18 trillion in 2027 before dropping to N15.84 trillion in 2028.
Debt service payments are projected to climb from N13.94 trillion in 2025 to N15.52 trillion in 2026. This pushes the debt service-to-revenue ratio from 34% in 2025 to an estimated 45% in 2026. The ratio is expected to rise to 53% in 2027 before easing to 47% in 2028.
Total federal expenditure is expected to dip slightly to N54.46 trillion in 2026. Recurrent non-debt spending, however, will rise to N15.27 trillion, driven mainly by personnel costs of N8.36 trillion and pensions of N1.38 trillion. Service-wide votes are projected to increase to N1.85 trillion.
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Capital expenditure is set to reduce from N26.19 trillion in 2025 to N22.37 trillion in 2026 due to a policy allowing ministries to roll over 70% of their 2025 capital allocations.
Privatisation proceeds and project-tied loans are expected to contribute marginally to the financing structure, with both declining in 2026 before recovering modestly in later years.
Experts raise concerns over debt sustainability
Economists and analysts who spoke to Punch newspaper expressed concerns over the rising deficit and its implications for macroeconomic stability.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, cautioned that the country must avoid reversing recent economic gains.
He warned that high deficits could intensify inflationary and exchange rate pressures, and deepen Nigeria’s debt vulnerabilities.
He advised the government to use improving revenue performance to reduce deficit levels and safeguard macroeconomic stability.
Also commenting, the National President of the Nigerian Economic Society, Prof. Adeola Adenikinju, warned that heavy domestic borrowing could crowd out the private sector by raising interest rates, slowing investment, and worsening economic conditions.
He stressed the need for government borrowing to focus on productive projects rather than recurrent spending.
African bank loans Nigeria $500 million for energy
Legit.ng earlier reported that the African Development Bank approved a new $500 million loan to support Nigeria’s ongoing energy reforms and fiscal policy improvements, after the Federal Executive Council (FEC) also approved a $100 million AfDB loan for the Nigeria Youth Investment Fund.
The energy funding represents the second phase of the Economic Governance and Energy Transition Support Programme, covering Nigeria’s 2024–2025 fiscal years.
According to AfDB, the programme aims to strengthen public financial management, reform the energy sector, and advance Nigeria’s climate action and energy transition plan.
Proofreading by James Ojo, copy editor at Legit.ng.
Source: Legit.ng
