FG Projects ₦54.43tn 2026 Budget as Debt Service Rises to ₦15.91tn, Deficit Widens to Historic Levels

The Federal Government has proposed a ₦54.43 trillion expenditure plan for the 2026 fiscal year, with debt servicing projected to reach ₦15.91 trillion almost four times the amount allocated to the same obligation in 2022. The figures, contained in the newly approved 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper, underscore Nigeria’s growing fiscal pressures as the country prepares for another year of elevated borrowing requirements and expanding budget deficits.

Budget Framework Signals Continuing Fiscal Strain

The 2026 fiscal plan anticipates a budget deficit of ₦20.10 trillion, a shortfall that exceeds the entire amended 2022 national budget of ₦17.32 trillion. Speaking after the Federal Executive Council meeting in Abuja, the Minister of Budget and Economic Planning, Atiku Bagudu, described the framework as “cautious and realistic,” noting that projected revenue for the year stands at ₦50.74 trillion.

According to Bagudu, the framework incorporates baseline macroeconomic assumptions that reflect ongoing volatility in oil production, foreign exchange liquidity, and government revenue performance.

Revenue Projections and Macroeconomic Assumptions

The fiscal plan relies on the following benchmarks:

• Oil price benchmark: $64.85 per barrel

• Exchange rate assumption: ₦1,512 per dollar

• Crude production benchmark: 1.8 million barrels per day (mbpd)

• Industry production target: 2.06 mbpd

The minister noted that the higher production target provides a buffer of 12.6% in the event of operational disruptions. Despite persistent macroeconomic headwinds, the government expects the economy to expand by 4.68% in 2026.

Revenue distribution under the Federation framework is projected as follows:

• Federal Government: ₦22.60 trillion

• States: ₦16.30 trillion

• Local governments: ₦11.85 trillion

The Federal Government’s total revenue pool including earnings from government-owned enterprises is estimated at ₦34.33 trillion, with ₦4.98 trillion expected from operating enterprises.

Debt Servicing to Consume Nearly One-Third of Spending

Debt service obligations are projected at ₦15.91 trillion, representing 29.2% of projected total expenditure in 2026. This means almost three out of every ten naira spent next year will go towards servicing existing debt.

For context, Nigeria allocated ₦3.98 trillion to debt service in 2022. The 2026 figure represents a 299% increase within four years, underlining the country’s heightened exposure to borrowing and rising interest-rate environments.

The proposed deficit of ₦20.10 trillion accounts for 36.9% of total spending more than double the ₦9.22 trillion deficit approved for the 2025 budget.

Experts Raise Concerns Over Macroeconomic Risks

Economists have warned that the scale of the projected deficit, combined with the rising debt-service burden, could threaten Nigeria’s medium-term financial stability and undermine investor confidence.

“Nigeria risks falling into a debt trap” — Muda Yusuf

Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, noted that elevated deficit financing could destabilise inflation, exchange rate conditions, and private-sector competitiveness. He cautioned that Nigeria may erode recent macroeconomic gains if borrowing continues to accelerate without corresponding structural reforms.

“There is no basis for a new budget without implementing the old one” — Prof. Sheriffdeen Tella

Sheriffdeen Tella, a professor of Economics at Olabisi Onabanjo University, criticised the pace of fiscal planning, arguing that the government has not sufficiently implemented the 2025 budget. He warned that Nigeria may inadvertently “operate multiple budgets within one fiscal year,” creating policy inconsistency.

“We are drifting away from the January–December cycle” — Prof. Adeola Adenikinju

The National President of the Nigerian Economic Society, Prof. Adeola Adenikinju, observed that Nigeria is again behind schedule on its budget cycle, a situation he believes undermines predictability and weakens investor sentiment. He also questioned the legality of the projected deficit, noting that the Fiscal Responsibility Act sets a 3 per cent ceiling relative to GDP.

Government Emphasises Fiscal Discipline and Policy Coordination

Bagudu stated that the new MTEF/FSP integrates recommendations from the Economic Management Team and the National Economic Council, with key priorities including:

• Tighter coordination between fiscal and monetary authorities

• Expanded investment in security and critical infrastructure

• Stronger mechanisms to reduce revenue leakages in oil, gas, and solid minerals

The approved framework will form the basis of the 2026 Appropriation Bill, which will be transmitted to the National Assembly in the coming weeks.

Conclusion

Nigeria’s proposed 2026 spending plan reflects a difficult fiscal environment marked by rising borrowing costs, modest revenue growth, and structural weaknesses in public finance management. While the government aims to balance caution with realism, analysts argue that the widening deficit and escalating debt-service profile pose significant risks to Nigeria’s economic outlook. Policymakers will face growing pressure to pursue deeper structural reforms as the budget process advances.