By Sandra Ugwu 

The Federal Government is planning to raise N17.89tn in new loans next year to finance a widening budget deficit, according to the 2026 budget framework obtained from the Budget Office of the Federation. The proposed borrowing marks a sharp 72 per cent jump from the N10.42tn approved for 2025.

Government data show that the fiscal deficit will climb to N20.12tn in 2026, up from N14.10tn this year. Despite the increase, the deficit-to-GDP ratio is expected to ease from 4.17 per cent to 3.61 per cent, aided by a projected expansion in GDP.

A major factor behind the heavier borrowing is a significant slump in revenue. Federal revenue available for the budget, excluding government-owned enterprises is forecast to drop by 23 per cent, from N38.02tn in 2025 to N29.35tn in 2026. Revenue is expected to recover slightly in subsequent years but not enough to reduce the government’s reliance on debt.

As in previous years, domestic lenders will carry most of the burden. Of the planned N17.89tn borrowing for 2026, 80 per cent (N14.31tn) will be sourced locally, while the remaining 20 per cent (N3.58tn) will come from external creditors. The same pattern is projected through 2028.

Over the three-year period from 2026 to 2028, the Federal Government expects to borrow N54.91tn in total, with domestic sources providing N43.92tn of that amount.

Debt servicing is also set to rise. The government projects N15.52tn for debt service in 2026, up from N13.94tn this year - an 11 per cent increase. The debt service-to-revenue ratio is expected to worsen from 34 per cent in 2025 to 45 per cent in 2026, before peaking at 53 per cent in 2027.

Total federal spending is slated to edge down slightly to N54.46tn in 2026, but recurrent obligations and debt service will dominate expenditure. Recurrent non-debt spending will grow to N15.27tn, including N8.36tn for personnel costs and N1.38tn for pensions and gratuities.

Capital spending, meanwhile, is projected to fall to N22.37tn, partly because ministries and agencies will roll over a large share of their 2025 allocations into the new year.

Economists have expressed concern about the sustainability of the government’s borrowing plan. Dr Muda Yusuf, Chief Executive of the Centre for the Promotion of Private Enterprise, said the rising deficit threatens the fragile macroeconomic stability Nigeria has regained in recent months. He urged the government to use improved revenue performance to reduce the deficit rather than expand it.

The President of the Nigerian Economic Society, Professor Adeola Adenikinju, warned that heavy domestic borrowing could crowd out private-sector funding and push up interest rates. He questioned the effectiveness of government spending, noting that capital releases often arrive too late to deliver meaningful development.

At a national debt dialogue in Abuja, stakeholders raised alarm over Nigeria’s growing liabilities and the long-term impact on future generations. Speakers said frequent borrowing without visible development results undermines public trust and deepens the country’s structural challenges.

BudgIT’s Acting Country Director, Joseph Amenaghawon, described Nigeria’s situation as “debt without development,” arguing that loans are being channeled into recurrent expenses rather than transformative infrastructure. He called for stronger transparency, measurable outcomes, and strict project monitoring.