Our Correspondent | Business
The Federal Government has proposed a N54.43 trillion expenditure plan for 2026, with N15.91tn—almost one-third of the entire budget—allocated to debt servicing alone. The administration also projected a record deficit of N20.10tn, a figure that not only exceeds one-third of next year’s spending but also surpasses the entire 2022 national budget by N2.78tn.
Economists warn that the fiscal outlook signals deepening strain on public finances, with the size of the deficit—118 per cent higher than that of 2025—raising fresh concerns about sustainability, inflationary risks and investor confidence.
The figures are contained in the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) approved by the Federal Executive Council on Wednesday. Minister of Budget and Economic Planning, Atiku Bagudu, who briefed State House correspondents, said the document would be transmitted to the National Assembly on Monday.
Bagudu defended the assumptions underpinning the draft budget, saying it was built on a “cautious” oil benchmark of $64.85 per barrel and an exchange rate of N1,512/$ for 2026. He added that the government relied on a dual crude production estimate—2.06 million barrels per day (mbpd) as the industry target, and a conservative benchmark of 1.8 mbpd.
“The difference provides us with a safety buffer of about 12.6 per cent in the event of output disruptions,” he said. He also projected 4.68 per cent economic growth for 2026, but warned that “election-related spending can typically affect the exchange rate,” given that 2026 is a pre-election year.
Debt Burden Grows Despite Revenue Projections
The minister announced that total Federation revenue for 2026 is expected to reach N50.74tn, of which the Federal Government’s share is N22.60tn. Total FG revenue—including earnings from government-owned enterprises—is projected at N34.33tn, a figure he admitted is 16 per cent lower than the 2025 estimate.
Key spending items include statutory transfers of N3tn and non-debt recurrent expenditure of N15.27tn. Debt service, at N15.91tn, will consume 29.2 per cent of the entire budget—meaning nearly three of every ten naira spent next year will go towards paying interest and principal on existing loans.
The proposed N20.10tn deficit amounts to 36.9 per cent of total expenditure, signalling government’s intent to borrow more than one-third of its planned spending for 2026.
Economists Warn of Mounting Fiscal Risk
Experts interviewed by The PUNCH said the outlook exposes the economy to deeper vulnerabilities.
The Chief Executive of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, warned of a looming debt trap if the government continues on its current trajectory.
“We need to worry about debt sustainability,” he said. “High levels of deficits and debt can choke the fiscal space and create a vicious circle of borrowing. We already have a reasonable level of macroeconomic stability, and once we lose that recovery, inflation and exchange rate pressures will intensify.”
Yusuf urged the government to capitalise on its improved revenue performance to cut the deficit rather than expand it. “We must moderate the level of deficit and debt exposure so that we don’t put at risk the stability we have achieved,” he added.
Professor Sheriffdeen Tella of Olabisi Onabanjo University criticised the credibility of the budget process itself, saying the 2026 projections lacked a sound empirical basis.
According to him, “the 2026 budget is supposed to be premised on the performance of 2025, but they have just started implementing the 2025 budget in December. There is no basis for new projections.”
He described the growing deficit as “troubling”, arguing that “putting a deficit that is more than the budget of a year means the figures are not grounded in reality.”
Tella warned that Nigeria risks running “two or three budgets in the same year”, which he said was “a sign of fiscal disorder”.
The National President of the Nigerian Economic Society, Professor Adeola Adenikinju, also criticised the government’s return to late budget cycles. “The 2026 budget should already be before the National Assembly if we intend to keep the January–December fiscal year,” he said.
Adenikinju noted that rushing the budget “does not allow for proper scrutiny,” weakening the entire fiscal framework. He also raised concerns about the scale of borrowing.
“Our deficit should stay below three per cent of GDP as stipulated by the Fiscal Responsibility Act,” he cautioned. “If you borrow heavily from the domestic market, interest rates will go up because banks will prefer lending to government rather than private businesses.”
He added that late capital releases—often occurring only weeks before year-end—reduce the developmental impact of public spending. “Persistent borrowing without productive outcomes will worsen inflation and currency instability,” he warned.
Nigeria’s public finances have been under severe pressure in recent years, driven by low oil output, weakening currency earnings, rising debt obligations and costly subsidy reforms. Although the government says revenue collection is improving, expenditure has risen faster—particularly on personnel costs, overheads and debt service.
The deficit for 2026—at N20.10tn—is more than double that of 2025 and nearly quadruple the amended 2022 budget’s total debt servicing provision. Analysts say the trend underscores Nigeria’s reliance on borrowing and highlights the urgency of structural fiscal reforms, including stronger revenue collection, reduced leakages and more disciplined budget execution.