…Almost half of its revenue set to pay debt
The Federal Government plans to borrow a staggering ₦17.89 trillion in 2026 to fund its budget as revenue projections fall sharply short of expenditure needs.
According to the 2026 Abridged Budget Call Circular from the Ministry of Budget and Economic Planning, new borrowing will surge from ₦10.42 trillion in 2025, marking a 72% increase in fresh loans amid growing concerns over debt sustainability.
The sharp rise is driven by a larger fiscal deficit, projected at ₦20.12 trillion in 2026, up from ₦14.10 trillion in 2025. Despite this jump, the deficit-to-GDP ratio is expected to fall slightly to 3.61% due to a higher GDP base, with a further projected decline to 3.24% in 2027 and 1.92% in 2028.
Revenue shortfalls explain the heavy reliance on borrowing. Funds available for the federal budget are expected to drop by ₦8.67 trillion to ₦29.35 trillion in 2026, before gradually recovering to ₦31.53 trillion in 2027 and ₦34.90 trillion in 2028.
Experts warn that the recovery is insufficient to reduce dependence on debt in the medium term.
The bulk of the borrowing – ₦14.31 trillion, or 80% will come from domestic creditors, with external borrowing making up ₦3.58 trillion. This reliance on local debt mirrors trends in previous years and is expected to continue through 2028, when total planned borrowing for the three-year period will reach ₦54.91 trillion.
Debt servicing is set to rise alongside borrowing, increasing from ₦13.94 trillion in 2025 to ₦15.52 trillion in 2026. This will push the debt service-to-revenue ratio to 45 per cent, meaning nearly half of government revenue will be used to repay interest and principal, placing a heavy strain on fiscal space.
While total federal expenditure is projected to edge down slightly to ₦54.46 trillion in 2026, spending priorities continue to favour recurrent costs and debt service. Recurrent non-debt expenditure will rise from ₦13.59 trillion to ₦15.27 trillion, while capital spending falls sharply from ₦26.19 trillion to ₦22.37 trillion due to the rollover of 70% of 2025 allocations. Experts warn that the skewed spending pattern could undermine infrastructure development and future economic growth.
At a recent national debt dialogue in Abuja, experts raised alarms about Nigeria’s growing liabilities. Muda Yusuf, of the Centre for the Promotion of Private Enterprise, cautioned against a “debt trap”, stressing that high deficits and rising debt could threaten macroeconomic stability and worsen inflation and exchange rate pressures.
Also, president of the Nigerian Economic Society, Adeola Adenikinju, warned that borrowing heavily from domestic markets could crowd out the private sector and raise interest rates, slowing investment and economic growth.
Participants also highlighted the human cost of debt. Ikenna Ofoegbu, of the Sustainable Nigeria Programme, noted that future generations will inherit the liabilities, while Folahan Johnson, of the Centre for Inclusive Social Development, stressed the impact on vulnerable Nigerians, including out-of-school children and women lacking access to basic health care.
BudgIT’s Acting Country Director, Joseph Amenaghawon, argued that borrowing has yet to translate into meaningful development, with loans largely financing recurrent spending rather than transformative infrastructure projects. He urged greater transparency, accountability, and strict monitoring of projects to ensure debt serves as a bridge to Nigeria’s future rather than a burden for generations to come.
Experts warned that without strict project monitoring, transparency, and a strategic focus on productive spending, Nigeria may entrench a debt-dependent trajectory, leaving future generations to shoulder financial liabilities without tangible benefits.
