By Swill Mavua
Nigeria’s proposed 2026 federal budget, presented by President Bola Tinubu in late 2025 and currently under legislative scrutiny, totals approximately ₦58.18 – 58.47 trillion in expenditure. This ambitious fiscal plan projects revenue of around ₦33 – 34.3 trillion, resulting in a substantial deficit of ₦23.85 – 25.91 trillion — equivalent to roughly 4.28 – 4.5% of GDP. A significant portion of the budget — about ₦15.52 – 15.9 trillion — is allocated to debt servicing, consuming nearly 45 – 60% of expected revenue depending on actual performance. This leaves limited fiscal space for capital projects, social services, and other priorities, raising serious questions about sustainability and long-term economic health.
The deficit financing primarily relies on new borrowing, meaning the government plans to add roughly ₦24 – 26 trillion to the national debt stock in 2026 alone. Public debt has already climbed sharply in recent years. As of mid-2025, Nigeria’s total public debt stood at around ₦152 trillion (approximately $100 billion), with projections for end-2026 placing the debt-to-GDP ratio at 34.68 – 39%, according to sources like the Central Bank of Nigeria, IMF, and Fitch Ratings. While this ratio remains relatively moderate compared to many emerging markets (where ratios often exceed 50–60%), the more pressing concern is debt service costs crowding out productive spending. Debt servicing has ballooned from ₦712 billion in 2014 to over ₦12 trillion in recent years, and the 2026 figure risks keeping the service-to-revenue ratio in the 50–60% range, creating a near-structural “debt trap” where new loans increasingly fund old obligations rather than growth.
Is this trajectory healthy for the economy? On paper, a debt-to-GDP ratio below 40% suggests room for maneuver, especially if GDP growth (projected at 4.2–4.7%) outpaces debt accumulation and revenues improve through tax reforms or higher oil output. However, vulnerabilities abound: naira depreciation inflates the local-currency cost of external debt (about 40% of total), high domestic interest rates drive up servicing costs, and revenue shortfalls have been chronic. Analysts from BudgIT and others warn that without aggressive fiscal discipline—such as cutting wasteful recurrent spending or boosting non-oil revenue—the cycle could worsen, potentially leading to higher inflation, reduced investment, and greater intergenerational inequity.
Governments worldwide borrow to invest in infrastructure, education, and other assets that yield future returns exceeding borrowing costs, theoretically benefiting unborn generations. In Nigeria’s case, the administration justifies deficits by pointing to allocations like ₦26 trillion for capital projects in security, infrastructure, education, and health. Yet critics argue that much borrowing supports recurrent costs (salaries, overheads) or inefficient projects, with poor execution and transparency undermining impact. The result is a growing burden passed to future taxpayers without commensurate visible benefits — roads, power, or jobs that could expand the economy and revenue base.
Under President Tinubu (since May 2023), public debt has risen rapidly in naira terms — from about ₦87 trillion inherited from the Buhari era to over ₦150 trillion by late 2025 — reflecting accelerated borrowing to fund reforms like fuel subsidy removal and exchange rate unification. While naira figures show a faster pace than under Buhari (who added roughly ₦75 trillion over eight years), much of the increase stems from currency devaluation rather than sheer volume of new loans. Still, the Tinubu administration has overseen significant additions, often criticized for lacking substantial, tangible outcomes amid persistent hardship.
This fiscal strain occurs against a backdrop of deep inequality. While ordinary Nigerians grapple with hunger, inflation, and eroded purchasing power, reports highlight elite excesses: lavish allowances, frequent foreign medical trips and holidays, and overseas education for politicians’ families. Recurrent non-debt spending remains high, fueling perceptions that public resources prioritize the political class over the masses. Such disparities erode trust and tax compliance, further weakening revenue prospects.
Nigeria’s 2026 budget underscores a familiar dilemma: short-term borrowing to bridge gaps risks long-term instability unless paired with genuine reforms — expanding the tax base, improving expenditure efficiency, and ensuring borrowed funds deliver measurable growth. Without these, the debt profile will continue burdening generations yet unborn, while the promise of shared prosperity remains elusive. The path forward demands not just fiscal ambition, but accountability and discipline to turn borrowing into genuine development rather than a perpetual cycle of repayment.
The Straight Talk
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