Nigeria Targets N17.89tn Fresh Borrowing to Plug 2026 Budget Gap

By: Chioma Madonna Ndukwu

Nigeria Targets N17.89tn Fresh Borrowing to Plug 2026 Budget Gap

The Federal Government is proposing new loans totalling N17.89tn in 2026 to cover a widening budget deficit, according to official documents from the Budget Office.

The proposed borrowing represents a sharp rise from the N10.42tn approved for 2025, driven by falling revenue projections and higher fiscal pressures.

The 2026 budget framework places the fiscal deficit at N20.12tn, up from N14.10tn in 2025. Despite the increase in nominal deficit, the deficit-to-GDP ratio is expected to drop slightly due to a larger economic base.

Government revenue available for the federal budget—excluding income from government-owned enterprises—is forecast to fall by 23%, from N38.02tn in 2025 to N29.35tn in 2026. Modest gains are projected for 2027 and 2028, but not enough to significantly reduce borrowing needs.

The government plans to source 80% of the 2026 loans from domestic creditors (N14.31tn) and 20% from external sources (N3.58tn). This heavy domestic reliance is expected to continue through 2028. In total, N54.91tn in fresh loans is planned between 2026 and 2028.

Debt servicing will also rise, with payments projected at N15.52tn in 2026, meaning nearly half of federal revenue could go toward servicing existing obligations. Recurrent spending—including personnel costs, pensions, and service-wide votes—continues to expand, while capital expenditure is set to decline in 2026 due to project rollovers.

Economists interviewed warn that the ballooning deficit and increased domestic borrowing could heighten inflation, worsen interest rates, crowd out private sector credit, and threaten recent signs of macroeconomic stability. They stress that borrowing must be tied to productive investments, not recurrent spending.

Civil society and development experts also expressed concerns that rising debt, limited transparency, and slow project implementation pose long-term risks for future generations, especially in a country already vulnerable to climate-related damage and infrastructure deficits.

Many urged the government to prioritise accountability, strengthen revenue performance, and ensure that loans translate into tangible development outcomes rather than future burdens.

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Chioma Ndukwu

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