The Federal Government plans to borrow N17.89 trillion in 2026 to finance a widening budget deficit as revenues fall far below projected spending, according to the 2026 budget framework obtained from the Budget Office of the Federation.

Figures from the 2026 Abridged Budget Call Circular issued by the Federal Ministry of Budget and Economic Planning show that new borrowing will rise sharply from N10.42tn in 2025 to N17.89tn in 2026 — an increase of N7.46tn (72%).

The surge in borrowing is driven by a larger fiscal deficit and weaker revenue outlook. The 2026 deficit is projected at N20.12tn, up from N14.10tn approved for 2025 — a 43% increase. However, due to expected GDP growth, the deficit-to-GDP ratio is forecast to fall from 4.17% in 2025 to 3.61% in 2026, and further to 3.24% in 2027 and 1.92% in 2028.

Revenue Drop Deepens Borrowing Needs

Federal revenue (excluding earnings from government-owned enterprises) is expected to plunge from N38.02tn in 2025 to N29.35tn in 2026 — a drop of N8.67tn (23%). Revenue is projected to recover slightly to N31.53tn in 2027 and N34.90tn in 2028, but not enough to reduce dependence on debt.

Domestic Borrowing to Dominate

Documents reviewed by RealityGist show that 80% of the 2026 borrowing will come from domestic lenders. Of the planned N17.89tn, N14.31tn will be sourced locally, while N3.58tn will come from external creditors.

This pattern mirrors 2025 projections, where N8.58tn out of N10.42tn (82%) will be raised domestically.

The trend continues through 2028:

2027: N21.18tn borrowing (N16.94tn domestic, N4.24tn external)

2028: N15.84tn borrowing (N12.67tn domestic, N3.17tn external)

Altogether, the FG plans to borrow N54.91tn between 2026 and 2028, with N43.92tn (80%) coming from the domestic market.

Debt Service Rising Fast

Debt servicing is projected to increase from N13.94tn in 2025 to N15.52tn in 2026 — an 11% rise. The debt-service-to-revenue ratio will worsen from 34% in 2025 to 45% in 2026, meaning nearly half of federal revenue will go into servicing debt.

The ratio is forecast to hit 53% in 2027 before easing to 47% in 2028.

Spending Priorities Shift Toward Recurrent Costs

Total federal expenditure will drop slightly 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 to rise from N13.59tn to N15.27tn in 2026, including:

N8.36tn for personnel costs

N1.38tn for pensions and gratuities

N1.85tn for service-wide votes

Capital expenditure will fall from N26.19tn in 2025 to N22.37tn in 2026, largely because ministries will roll over 70% of their 2025 capital budget into 2026.

Privatisation & Project Loans Decline

Privatisation revenue is expected to drop from N312.33bn in 2025 to N189.16bn in 2026. Project-tied loans from international partners will also fall from N3.36tn in 2025 to N2.05tn in 2026, and further to N556.66bn by 2028.

Experts Raise Red Flags

Speaking to RealityGist, economists warned that the massive deficit — over one-third of the proposed N54.43tn spending plan — raises concerns about debt sustainability, inflation, and exchange rate stability.

Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, warned that Nigeria risks falling into a “debt trap.”

> “High deficits and rising debt can choke the fiscal space and trigger a vicious cycle of borrowing,” he said.
“We have regained some macroeconomic stability. Losing it will worsen inflation and put more pressure on the exchange rate.”

He urged the government to use improved revenue performance to reduce the deficit rather than expand it.

Also speaking, Professor Adeola Adenikinju, President of the Nigerian Economic Society, cautioned that heavy domestic borrowing could crowd out the private sector.

> “If the government borrows aggressively from the public, interest rates will rise, and banks may prefer lending to government over businesses,” he said.
“This will hurt investment and worsen economic hardship.”

At a national debt dialogue in Abuja, experts warned that Nigeria is piling up liabilities future generations may inherit without benefitting from the projects the loans were meant to fund.

> “At the end of the day, these debts will be passed to our children,”
said Ikenna Ofoegbu of the Sustainable Nigeria Programme.