The Federal Government plans to borrow N17.89 trillion from domestic and foreign sources to finance the N20.12 trillion deficit in the 2026 budget, according to the 2026 Abridged Budget Call Circular issued by the Ministry of Budget and Economic Planning.
Of the total borrowing, N14.31 trillion (80%) will be sourced locally, while N3.58 trillion (20%) will come from external lenders.
The circular shows borrowing is expected to rise from N17.89 trillion in 2026 to N21.18 trillion in 2027, before dropping to N15.84 trillion in 2028.
The 2026 deficit represents a 43 per cent increase from the N14.10 trillion deficit in the 2025 budget.
Despite the higher deficit, the deficit-to-GDP ratio is projected to decline from 4.17 per cent in 2025 to 3.61 per cent in 2026, reflecting expectations of a larger GDP base. The ratio is projected to ease further to 3.24 per cent (2027) and 1.92 per cent (2028).
Debt servicing is set to climb from N13.94 trillion in 2025 to N15.52 trillion in 2026, an increase of N1.58 trillion. BusinessDay’s analysis shows that debt service will consume 45 per cent of revenue in 2026, rising to 53 per cent in 2027, before easing to 47 per cent in 2028.
Total federal expenditure is projected to decline slightly from N54.99 trillion (2025) to N54.46 trillion (2026). However, spending continues to be driven by recurrent costs and debt service.
Recurrent non-debt spending is expected to rise from N13.59 trillion in 2025 to N15.27 trillion in 2026. Personnel costs for ministries and departments will take N8.36 trillion, while pensions, gratuities and retiree benefits will cost N1.38 trillion. Service-wide votes, including key programmes, will rise from N1.06 trillion to N1.85 trillion.
Meanwhile, capital expenditure will fall from N26.19 trillion (2025) to N22.37 trillion (2026). The government plans to roll over 70 per cent of 2025 capital allocations into the 2026 budget.
The circular notes that MDA capital budget ceilings for 2026 have been set at 70 per cent of their 2025 allocations, reflecting the government’s commitment to release 30 per cent of the 2025 capital budget within the current fiscal year while carrying the remaining 70 per cent forward as the base for 2026.
