Nigeria’s 2026 borrowing plan: Lifeline, liability, or slow path to insolvency?

The Federal Government’s disclosure that it intends to borrow ₦17.89 trillion to fund the 2026 budget has revived a long-standing national dilemma: is Nigeria financing its stability or edging closer to insolvency? The headline numbers are alarming, but the deeper story is more complex: a country trapped between immediate fiscal pressures and the structural limitations of its political economy. For investors, workers, and businesses already navigating stagflation, insecurity, and currency volatility, this borrowing plan is not an abstract fiscal exercise. It is a window into the country’s priorities, vulnerabilities, and future trajectory.

With a projected deficit of ₦20.12 trillion, borrowing has become the government’s default strategy for keeping the state running. Security operations must be funded, social programmes must remain afloat, and infrastructure gaps still demand attention. In that sense, borrowing is the lifeline preventing a fiscal shutdown; yet the sheer scale of the planned debt raises a more uncomfortable question: how long can a country borrow for survival without borrowing into collapse?

Read also: FG plans N17.89trn borrowing to fund 2026 budget

Government officials point to a drop in the deficit-to-GDP ratio, from an estimated 4.17 percent in 2025 to 3.61 percent in 2026, as evidence of prudence. For global markets, which evaluate fiscal health through ratios rather than nominal sums, this signals better alignment with international norms. But ratios are abstract. Revenues are real. And Nigeria’s revenue base remains among the weakest in the world relative to GDP, undermined by oil theft, inefficient tax collection, leakages in customs, and slow productivity growth. A lower deficit ratio is helpful, but it does not resolve the structural weakness beneath.

The borrowing composition underscores the tension between fiscal necessity and economic consequences. Roughly 80%, around ₦14.31 trillion, will be raised domestically. The rationale is clear: avoid exchange-rate risks, reduce exposure to external creditors, and retain greater fiscal sovereignty. But heavy domestic borrowing has its own casualties. When the government dominates the local debt market, banks pivot toward risk-free government securities instead of lending to businesses. For manufacturers in Aba, SMEs in Kano, or tech firms in Lagos, the impact is already visible in soaring interest rates and tightened credit conditions. The more the government borrows at home, the more the private sector suffocates.

“But borrowing is not a development model. It is a bridge and Nigeria too often builds bridges to nowhere.”

The larger warning sign is debt servicing. By 2026, Nigeria plans to spend ₦15.52 trillion servicing its obligations, nearly half of its projected revenue. This is not merely unsustainable; it is economically constricting. A government that spends more on past debts than on education, healthcare, or productive infrastructure is not laying foundations for future growth. It is buying time at the cost of tomorrow’s prosperity. And with revenues stagnant, the debt-service-to-revenue ratio is inching closer to the danger zone typically associated with fiscal distress.

Still, the borrowing plan is not entirely devoid of strategic value. The decision to roll over 2025 capital projects into 2026 indicates a commitment to continuity. Nigeria’s infrastructure landscape is littered with abandoned or recycled projects: casualties of political cycles, bureaucratic inefficiency, and shifting budget priorities. A multi-year approach offers a semblance of discipline and could improve long-term returns on capital spending.

But borrowing is not a development model. It is a bridge and Nigeria too often builds bridges to nowhere. Recurrent expenditure continues to balloon, while civil service reform remains politically inconvenient. Ministries and agencies proliferate without corresponding efficiency. Capital formation remains weak, and productivity-enhancing sectors receive a fraction of the needed investment. Without a credible plan to reduce overheads and grow revenue, borrowing simply postpones the crisis rather than preventing it.

Critics rightly argue that the real problem is how Nigeria spends borrowed funds. Debt can be catalytic if invested in commercially viable infrastructure, energy reform, export corridors, and agro-industrial value chains. But if loans are absorbed by inflated contracts, political patronage, or bureaucratic consumption, the country drifts deeper into a fiscal cul-de-sac, regardless of how elegant the deficit ratios appear.

Supporters counter that Nigeria faces extraordinary pressures: currency instability, food inflation, insecurity, and a fragile social compact. Cutting expenditure now could trigger deeper hardship, stall economic activity, and worsen public discontent. In their view, strategic borrowing is the least harmful option in a menu of bad choices. Their argument reflects political reality, even if it risks long-term vulnerability.

Read also: How Nigeria’s states are borrowing their way into crisis

Nigeria’s challenge is not choosing between borrowing and austerity; it is choosing between responsible borrowing and blind dependence. The path forward requires discipline: modernising tax systems, revamping customs operations, restoring oil production, capping recurrent expenditure, and enforcing rigorous value-for-money audits on major projects. Without these reforms, the 2026 borrowing plan becomes another attempt to buy time with money Nigeria does not have.

The country is not yet trapped, but the walls are closing in. Borrowing will remain part of the fiscal playbook: the question is whether it becomes a tool for transformation or a crutch for dysfunction. Nigeria must decide whether it is borrowing to build its future or borrowing to delay its fate.

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