The Federal Government is preparing to take on N17.89tn in new loans to fund the 2026 federal budget as dwindling revenue and a widening deficit force Nigeria into deeper borrowing.
According to the 2026 Budget Framework obtained from the Budget Office, the new borrowing plan represents a 72% increase from the N10.42tn approved for 2025 — the steepest rise in recent years.
The documents, captured in the Abridged Budget Call Circular issued by the Ministry of Budget and Economic Planning, reveal that Nigeria’s fiscal deficit will rise to N20.12tn in 2026, up from N14.10tn in 2025. Despite this expansion, the deficit-to-GDP ratio is expected to drop slightly to 3.61%, helped by a higher GDP projection.
Revenue Crisis Deepens
Federal revenue available for spending (excluding GOE retained earnings) is projected to fall from N38.02tn in 2025 to N29.35tn in 2026 — an 8.67tn decline representing about 23%.
Modest recovery is expected afterward, with revenues projected to hit N31.53tn in 2027 and N34.90tn in 2028, but analysts warn that the rebound is too weak to ease Nigeria’s heavy reliance on borrowing.
Domestic Borrowing Dominates
Like previous years, the 2026 borrowing plan leans heavily toward local creditors:
Domestic borrowing: N14.31tn (80%)
External borrowing: N3.58tn (20%)
The 80:20 borrowing pattern is projected to continue in 2027 and 2028.
Between 2026 and 2028, the Federal Government is expected to borrow a total of N54.91tn, with N43.92tn coming from the domestic market alone.
Debt Service to Consume Half of Revenue
Debt service is projected to hit N15.52tn in 2026, up from N13.94tn in 2025.
The debt service-to-revenue ratio — one of the clearest markers of fiscal stress — is forecast to rise to 45% in 2026 and 53% in 2027.
Experts say this means nearly one in every two naira the government earns will be spent on existing debt.
Experts Raise Alarm
Economists warn that rising borrowing could derail Nigeria’s fragile macroeconomic recovery.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, said Nigeria risks slipping into a “debt trap” if it continues on this path.
“We need to worry about debt sustainability,” he said. “High deficits and debt levels can choke the fiscal space and worsen inflationary and exchange rate pressures.”
Professor Adeola Adenikinju, President of the Nigerian Economic Society, warned that heavy domestic borrowing could crowd out private sector access to credit, raising interest rates and stalling economic growth.
Human Cost of Rising Debt
At a national debt dialogue in Abuja, analysts stressed that the burden of today’s decisions will fall on future generations.
“The true cost of debt is the out-of-school child and the woman who can’t access basic maternal care,” said CISD Executive Director Folahan Johnson.
Experts also highlighted the link between rising debt, climate change disasters, and inadequate infrastructure, urging the government to ensure that each loan is “traceable, verifiable, and tied to measurable development outcomes.”
