Revenue figures explain why the government is resorting to much larger borrowing. The amount available for the federal budget, excluding the retained revenue of government-owned enterprises, is projected to fall from N38.02tn in 2025 to N29.35tn in 2026.

This is a drop of N8.67tn or about 23 per cent between the two years. The government expects revenue to recover modestly to N31.53tn in 2027 and N34.90tn in 2028.

That implies growth of about seven per cent between 2026 and 2027 and about 11 per cent between 2027 and 2028, but the recovery is not strong enough to remove the need for heavy borrowing in the medium term.

The PUNCH further observed that the bulk of the 2026 borrowing will come from domestic creditors. The document shows that of the planned N17.89tn new loans for 2026, N14.31tn will be raised from the domestic market, while N3.58tn will be sourced from external creditors. Domestic borrowing, therefore, accounts for 80 per cent of new loans in 2026, while foreign borrowing contributes 20 per cent.

This strong tilt towards the local market is not new. In 2025, domestic borrowing is put at N8.58tn out of total new loans of N10.42tn, which is about 82 per cent of the borrowing requirement. External borrowing of N1.84tn makes up the remaining 18 per cent.

The same pattern is projected to continue after 2026. In 2027, the Federal Government plans to borrow N21.18tn, comprising N16.94tn in domestic debt and N4.24tn in external loans.

Domestic borrowing thus remains at 80 per cent of the total, with foreign loans at 20 per cent. In 2028, planned borrowing drops to N15.84tn, but the structure remains almost unchanged, with N12.67tn expected from domestic creditors and N3.17tn from external lenders, again roughly 80 and 20 per cent respectively.

When the numbers for the three budget years are added together, the scale of reliance on debt becomes clearer. Between 2026 and 2028, the Federal Government plans to borrow N54.91tn in total. Domestic creditors are expected to provide N43.92tn of this amount, while external creditors will supply N10.98tn.

This means domestic borrowing will account for exactly 80 per cent of new loans over the three-year period, with external debts making up the remaining 20 per cent. Year-on-year analysis of borrowing after 2026 shows a continued heavy dependence on debt, even though the trend turns downward towards the end of the period.

From 2026 to 2027, total new borrowing rises from N17.89tn to N21.18tn, an increase of about N3.29tn or roughly 18 per cent. Between 2027 and 2028, planned borrowing falls from N21.18tn to N15.84tn, a decline of about N5.34tn or roughly 25 per cent.

Debt service costs are also rising. According to the framework, debt service is projected at N13.94tn for 2025 and N15.52tn for 2026, an increase of N1.58tn, or about 11 per cent year-on-year.

The burden of these payments relative to revenue is captured in the debt service to revenue ratio. For 2025, the ratio is put at 34 per cent. In 2026, it is forecast to jump to 45 per cent, meaning nearly one naira out of every two naira of revenue available to the Federal Government will be used to pay interest and principal on existing debt.

The ratio is projected to rise further to 53 per cent in 2027 before easing to 47 per cent in 2028. Total federal expenditure is expected to edge down from N54.99tn in 2025 to N54.46tn in 2026, but the composition of spending continues to tilt towards recurrent items and debt service.

Recurrent non-debt expenditure is projected to rise from N13.59tn in 2025 to N15.27tn in 2026. Within this, personnel costs for ministries and departments will take N8.36tn, while pensions, gratuities, and retirees’ benefits will cost N1.38tn. Other service-wide votes, including key national programmes, will rise from N1.06tn in 2025 to N1.85tn in 2026.

Capital expenditure is set to fall from N26.19tn in 2025 to N22.37tn in 2026. The reduction is linked to a policy decision that ministries and agencies will roll over 70 per cent of their 2025 capital allocations into 2026 rather than seek fresh approvals for the same projects.

Capital spending is projected to recover slightly to N23.28tn in 2027 and then ease to N21.26tn in 2028. Even with this sizeable capital envelope, the combination of recurrent spending and debt service still dominates the budget and squeezes the room for new infrastructure.

Other financing items are relatively small when compared with the borrowing figures. Privatisation proceeds are projected at N312.33bn in 2025 and are expected to fall to N189.16bn in 2026. They are then forecast to rise modestly to N197.23bn in 2027 and jump to N486.54bn in 2028.

Even at that peak level, privatisation receipts would still amount to less than three per cent of total financing. Project-tied loans from multilateral and bilateral partners are also expected to decline from N3.36tn in 2025 to N2.05tn in 2026, then to N1.17tn in 2027, and N556.66bn in 2028.

Speaking earlier in separate interviews with The PUNCH, experts said the deficit, which represents more than one-third of the proposed N54.43tn spending envelope, raises fresh questions about debt sustainability, fiscal discipline, and the government’s ability to manage inflationary and exchange rate pressures in 2026.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said Nigeria must be cautious not to destroy the fragile stability achieved in recent months.

He warned that high deficits and rising debt levels pose a serious threat. Yusuf said he was worried about what he described as the risk of a debt trap, stating that “we need to worry about debt sustainability” because “high levels of deficits and high levels of debt… can choke the fiscal space and lead to a kind of vicious circle of debt.”

He explained that Nigeria has only recently regained some macroeconomic footing and that any disruption could quickly worsen inflation and exchange rate pressures.