The Federal Government intends 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 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 from N10.42tn in 2025 to N17.89tn in 2026, a 72% increase amid concerns over rising debt costs. The projected fiscal deficit for 2026 is N20.12tn, up from N14.10tn in 2025—an increase of 43%—though the deficit-to-GDP ratio is expected to fall from 4.17% to 3.61% due to a higher projected GDP.
Revenue shortfalls are driving the need for increased borrowing. Excluding retained earnings from government-owned enterprises, projected revenue for 2026 stands at N29.35tn, down from N38.02tn in 2025, a decline of 23%. Revenue is expected to recover gradually to N31.53tn in 2027 and N34.90tn in 2028, insufficient to remove the need for significant borrowing.
The bulk of borrowing will come from domestic sources, with N14.31tn (80%) raised locally and N3.58tn (20%) from foreign creditors. This trend mirrors 2025 borrowing patterns and is projected to continue through 2028. Over the three-year period, the government plans to borrow a total of N54.91tn, with domestic creditors providing N43.92tn and external lenders N10.98tn.
Debt service costs are rising, projected at N15.52tn in 2026, up 11% from 2025. The debt service-to-revenue ratio is forecast to increase from 34% in 2025 to 45% in 2026, meaning nearly half of government revenue will go toward servicing debt.
Total federal expenditure is expected to slightly decline from N54.99tn in 2025 to N54.46tn in 2026, but recurrent spending and debt service will dominate the budget. Recurrent non-debt spending is projected at N15.27tn, while capital expenditure falls from N26.19tn to N22.37tn, due to a policy of rolling over 70% of 2025 capital allocations.
Experts have raised concerns over debt sustainability. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, warned that high deficits and rising debt could threaten macroeconomic stability and exacerbate inflation and exchange rate pressures. Prof. Adeola Adenikinju, President of the Nigerian Economic Society, noted that heavy domestic borrowing could crowd out the private sector and raise interest rates, slowing investment.
Participants at a national debt dialogue also highlighted the social impact of debt. Ikenna Ofoegbu, Programme Manager at the Sustainable Nigeria Programme, stressed that debt has real consequences for future generations, particularly in addressing climate disasters, infrastructure, and social services.
BudgIT Acting Country Director Joseph Amenaghawon warned that borrowing has not translated into development, with loans largely financing recurrent expenditures rather than transformative projects. He described Nigeria’s fiscal challenges as a structural development crisis and called for greater transparency, accountability, and project monitoring to ensure borrowing becomes a bridge to sustainable growth rather than a burden for future generations.
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