By Seun Ibiyemi
The Federal Government has revealed its plan to borrow N17.89 trillion to fund a projected N20.12 trillion budget deficit in 2026.
This is according to the 2026 Abridged Budget Call Circular released by the Federal Ministry of Budget and Economic Planning.
In the circular seen by NewsDirect, N14.31 trillion, representing 80 percent of the borrowing, will be sourced from the domestic market, while the remaining N3.58 trillion will come from external lenders.
Government borrowing is also expected to rise to N21.18 trillion in 2027, before dropping to N15.84 trillion in 2028.
The projected 2026 deficit marks a 43 percent increase from the N14.10 trillion shortfall contained in the 2025 budget.
Despite this, the deficit-to-GDP ratio is forecast to fall from 4.17 percent in 2025 to 3.61 percent in 2026, driven by an expected expansion in the country’s GDP.
The ratio is projected to ease further to 3.24 percent in 2027 and 1.92 percent in 2028.
Debt servicing is also set to rise, increasing from N13.94 trillion in 2025 to N15.52 trillion in 2026, an addition of N1.58 trillion.
Analysis suggests that the debt service-to-revenue ratio could hit 45 percent in 2026, climb to 53 percent in 2027, and ease to 47 percent by 2028.
While overall federal expenditure is projected to dip slightly from N54.99 trillion in 2025 to N54.46 trillion in 2026, spending priorities remain heavily skewed towards recurrent obligations and debt repayment.
Recurrent non-debt expenditure is expected to rise from N13.59 trillion to N15.27 trillion, with: N8.36 trillion allocated to personnel costs, N1.38 trillion for pensions and gratuities, N1.85 trillion for service-wide votes and key national programmes, up from N1.06 trillion in 2025.
In contrast, capital expenditure will decline from N26.19 trillion in 2025 to N22.37 trillion in 2026.
This reduction follows a new financing approach under which 70 percent of 2025 capital allocation to ministries, departments, and agencies (MDAs) will be rolled over into 2026.
According to the circular, MDAs’ capital budget ceilings for 2026 have been set at 70 percent of their 2025 allocations.
The government said it plans to release 30 percent of the 2025 capital budget before the end of the year, with the remaining 70 percent carried forward to form the core of the 2026 capital plan.
The new budget structure reflects ongoing efforts by the government to manage fiscal pressures, sustain critical capital projects, and navigate rising debt costs amid constrained revenue growth.