The Federal Government plans to borrow N17.89tn in 2026 to finance a widening budget deficit as revenue projections fall sharply below expenditure needs, according to the 2026 budget framework obtained from the Budget Office of the Federation.
Figures contained in the 2026 Abridged Budget Call Circular released by the Federal Ministry of Budget and Economic Planning show that new borrowing will rise from N10.42tn in 2025 to N17.89tn in 2026. This represents an increase of N7.46tn or about seventy two per cent within one year amid growing concerns about debt sustainability and rising interest costs.
The projected fiscal deficit for 2026 stands at N20.12tn, compared with N14.10tn approved for 2025. Although the deficit expands by N6.02tn or roughly forty three per cent year on year, the deficit to gross domestic product ratio is projected to fall from 4.17 per cent in 2025 to 3.61 per cent in 2026 owing to a higher estimated GDP base. The ratio is expected to decline further to 3.24 per cent in 2027 and 1.92 per cent in 2028.
Revenues available to the Federal Government are projected to drop sharply. Government figures show that total revenue for the 2026 budget, excluding retained revenues of government owned enterprises, will fall from N38.02tn in 2025 to N29.35tn in 2026. This marks a decline of N8.67tn or about twenty three per cent. Modest recoveries are expected in 2027 and 2028, but the rebound is not strong enough to eliminate the need for heavy borrowing.
A review of the financing plan shows that domestic creditors will provide the bulk of the new loans. Of the N17.89tn in planned borrowing for 2026, N14.31tn will be raised locally, while N3.58tn will come from external lenders. The structure reflects an eighty to twenty per cent split between domestic and foreign borrowing, a pattern consistent with previous budget cycles.
The trend is forecast to continue after 2026. The government projects total borrowing of N21.18tn in 2027 and N15.84tn in 2028, with domestic borrowing consistently accounting for about eighty per cent. Over the three year period between 2026 and 2028, new loans are expected to total N54.91tn, of which N43.92tn will be sourced domestically.
Debt service obligations are also rising steeply. The framework puts debt service at N13.94tn in 2025 and N15.52tn in 2026, an increase of N1.58tn or about eleven per cent. The debt service to revenue ratio is projected to jump from thirty four per cent in 2025 to forty five per cent in 2026, meaning almost one naira out of every two earned by the government will be used to settle interest and principal payments. The ratio is expected to rise further to fifty three per cent in 2027 before easing to forty seven per cent in 2028.
Total federal expenditure is forecast to dip slightly from N54.99tn in 2025 to N54.46tn in 2026. However, the spending structure remains heavily tilted towards recurrent items and debt service. Recurrent non debt expenditure will rise from N13.59tn in 2025 to N15.27tn in 2026. Personnel costs will take N8.36tn, while pensions and gratuities will consume N1.38tn. Key service wide votes will also increase significantly.
Capital expenditure is projected to fall from N26.19tn in 2025 to N22.37tn in 2026, following a directive that ministries and agencies must roll over seventy per cent of their 2025 capital allocations into 2026 rather than request fresh approvals. Capital spending is expected to recover modestly in 2027 before easing again in 2028.
Other financing items remain relatively small. Privatisation proceeds are projected at N189.16bn in 2026, while project tied loans from multilateral and bilateral lenders are expected to decline from N3.36tn in 2025 to N2.05tn in 2026 and N556.66bn by 2028.
Economic experts interviewed by PUNCH warned that the growing deficit raises fresh concerns about rising debt, weak fiscal discipline, and macroeconomic pressures.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said Nigeria must guard against falling into a debt trap. He warned that high deficits combined with rising debt servicing obligations could choke fiscal space, undermine stability, and worsen inflation and exchange rate pressures.
He urged the government to leverage recent improvements in revenue performance to cut deficits instead of expanding them, noting that macroeconomic stability remains fragile.
Similarly, the National President of the Nigerian Economic Society, Professor Adeola Adenikinju, warned that heavy reliance on domestic borrowing would crowd out the private sector and force interest rates higher. He cautioned that banks may prefer lending to the government rather than to businesses, thereby slowing investment and worsening hardship.
Civil society experts speaking at a national debt dialogue in Abuja also expressed concerns about debt sustainability, intergenerational burdens, the economic cost of climate disasters, and the lack of transparency in government spending.
Speakers called for improved accountability, stronger capital project execution, and greater public scrutiny of government borrowing, warning that future generations may inherit liabilities without benefiting from the spending the loans were intended to finance.
