Nigeria’s 2026 Budget Framework Signals Sharp Rise in Borrowing as Revenue Weakens
Nigeria’s 2026 Budget Framework Signals Sharp Rise in Borrowing as Revenue Weakens
The Federal Government plans to raise ₦17.89 trillion in new loans to finance the 2026 budget, a 72% increase from the prior year, as declining revenue and a widening fiscal deficit deepen pressure on Nigeria’s public finances.
The borrowing plan, captured in the 2026 Budget Framework issued by the Budget Office and referenced in the Abridged Budget Call Circular of the Ministry of Budget and Economic Planning, outlines Nigeria’s most aggressive debt expansion in recent years. The Federal Government expects the fiscal deficit to reach ₦20.12 trillion in 2026, up from ₦14.10 trillion approved for 2025, even as total available revenue is projected to decline significantly.
Revenue Declines Intensify Fiscal Pressure
Federal revenue available for expenditure (excluding government-owned enterprise retained earnings) is projected to fall from ₦38.02 trillion in 2025 to ₦29.35 trillion in 2026, representing a 23% decline.
The government anticipates a moderate recovery in subsequent years, with revenue projected at ₦31.53 trillion in 2027 and ₦34.90 trillion in 2028. However, analysts argue that the rebound remains too weak to reduce Nigeria’s dependence on borrowing materially.
The decline in revenue coincides with broader macroeconomic headwinds, including lower oil production, constrained non-oil revenue performance, elevated debt service obligations, and persistent inflationary pressures.
Borrowing Structure Remains Dominated by the Domestic Market
The 2026 financing plan maintains the Federal Government’s preference for domestic borrowing. The Budget Framework allocates:
₦14.31 trillion (80%) to domestic borrowing
₦3.58 trillion (20%) to external borrowing
This 80:20 pattern is projected to remain in place through 2027 and 2028.
Between 2026 and 2028, Nigeria plans to borrow a total of ₦54.91 trillion, with ₦43.92 trillion expected to be sourced from the domestic market. Economists warn that sustained reliance on domestic debt could tighten liquidity, raise borrowing costs, and reduce private sector access to credit.
Debt Servicing to Consume Nearly Half of Federal Revenue
Debt service obligations are forecast to rise to ₦15.52 trillion in 2026, up from ₦13.94 trillion in 2025. The debt service-to-revenue ratio, a critical indicator of fiscal sustainability, is projected to reach 45% in 2026 and 53% in 2027.
A ratio above 50% indicates fiscal stress, with limited resources available for capital investment, social spending, and public sector operations.
Economist Dr. Muda Yusuf, Chief Executive of the Centre for the Promotion of Private Enterprise, warned that the trajectory heightens the risk of a potential “debt trap,” in which the government increasingly borrows to service existing debt instead of funding development.
He said the combination of high deficits and rising debt levels could “compress fiscal space, heighten inflationary pressures, and contribute to exchange rate instability.”
Economists Raise Concerns Over Domestic Debt Crowding Out Private Capital
President of the Nigerian Economic Society, Professor Adeola Adenikinju, noted that continued dependence on domestic borrowing places upward pressure on local interest rates and restricts businesses’ ability to access credit.
“Large-scale domestic mobilisation of funds for government borrowing limits private sector participation in the credit market. Elevated interest rates discourage productive investment and slow economic expansion,” he said.
The concern aligns with recent trends, as banks increasingly prefer lending to the government through risk-free securities rather than extending credit to businesses.
Human and Developmental Impact of Rising Debt
Beyond macroeconomic indicators, analysts continue to highlight the broader societal impact of persistent borrowing without corresponding improvements in infrastructure and public services.
At a national debt dialogue in Abuja, Folahan Johnson, Executive Director of the Centre for Impact Strategy and Development (CISD), emphasised that the consequences of debt mismanagement extend beyond fiscal spreadsheets.
He stated that “the actual cost of debt is reflected in social outcomes, the out-of-school child, the mother without access to essential healthcare, and the communities vulnerable to climate-related disasters because critical infrastructure remains unfunded.”
Experts at the dialogue called for stronger accountability mechanisms to ensure that every government loan is traceable, measurable, and tied to concrete development outcomes.
Outlook: Fiscal Consolidation Remains Critical
Nigeria’s 2026 Budget Framework underscores the growing complexity of managing a large economy under significant fiscal strain. With revenue declining and debt obligations rising, the Federal Government faces mounting pressure to accelerate economic reforms, strengthen non-oil revenue mobilisation, and reduce public spending inefficiencies.
While the drop in the deficit-to-GDP ratio to 3.61% suggests limited relief driven by a higher GDP projection, economists stress that structural reforms will be required to prevent long-term fiscal vulnerabilities.
For investors, policymakers, and financial institutions, the 2026 borrowing plan signals both risk and opportunity underscoring the urgency of balancing fiscal expansion with sustainability.
