Key Points

• FG plans N17.89tn borrowing in 2026 to fund budget deficit.
• Domestic loans account for 80 percent of total borrowing.
• Debt service costs rise, putting pressure on government revenue.

The Federal Government plans to borrow N17.89 trillion in 2026 to cover a widening budget deficit as revenue projections fall sharply below 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 new borrowing rising from N10.42 trillion in 2025 to N17.89 trillion in 2026, a 72 percent increase. Rising debt costs and fiscal pressures are driving the borrowing surge.

The 2026 fiscal deficit is projected at N20.12 trillion, up from N14.10 trillion in 2025.

Despite the nominal increase, the deficit-to-GDP ratio is expected to fall from 4.17 percent in 2025 to 3.61 percent in 2026 due to a higher projected GDP base.

Domestic Borrowing Dominates

The bulk of the planned borrowing will come from domestic creditors. Of the N17.89 trillion, N14.31 trillion will be raised locally, while N3.58 trillion will come from external sources.

Domestic borrowing thus accounts for 80 percent of new loans, a trend expected to continue through 2028.

The government plans total borrowing of N54.91 trillion between 2026 and 2028, with N43.92 trillion from domestic lenders and N10.98 trillion from foreign creditors.

Year-on-year borrowing rises from N17.89 trillion in 2026 to N21.18 trillion in 2027 before declining to N15.84 trillion in 2028.

Rising Debt Service Costs

Debt service costs are projected at N15.52 trillion in 2026, up 11 percent from N13.94 trillion in 2025.

The debt service-to-revenue ratio will jump from 34 percent in 2025 to 45 percent in 2026, meaning nearly half of available revenue will go to interest and principal payments.

Recurrent non-debt spending will rise to N15.27 trillion, while capital expenditure falls from N26.19 trillion in 2025 to N22.37 trillion in 2026.

Ministries and agencies are expected to roll over 70 percent of 2025 capital allocations instead of seeking fresh approvals.

Privatisation receipts are forecast to contribute less than three percent of total financing in 2026, while project-tied loans from bilateral and multilateral partners are also set to decline.

Experts Warn on Fiscal Risks

Economists warn the scale of borrowing raises concerns about debt sustainability and fiscal discipline.

Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, said high deficits could threaten the fragile macroeconomic stability recently achieved.

“If we borrow too heavily, we risk a debt trap that could choke fiscal space and worsen inflation and exchange rate pressures,” Yusuf said.

Professor Adeola Adenikinju, president of the Nigerian Economic Society, added that heavy domestic borrowing could crowd out the private sector, raise interest rates, and slow investment.

Debt advocates also stressed transparency and development impact. Ikenna Ofoegbu of the Sustainable Nigeria Programme said, “Our children will inherit these debts without seeing the development these loans are supposed to deliver.”

BudgIT’s Acting Country Director, Joseph Amenaghawon, warned, “Borrowing should fund transformative projects, not just recurrent spending. Debt must be traceable and linked to measurable outcomes.”

Borrowing Should Support Development

Experts urged that loans be used to build infrastructure, resilient communities, and a productive economy.

They stressed accountability, transparency, and citizen oversight to prevent future generations from inheriting unproductive liabilities.

Amenaghawon added, “Debt is not inherently bad. If managed well, it can become a bridge to Nigeria’s future rather than a burden.”