Businesses Suffer as FG’s Domestic Borrowings Soar 90% To N24.7 Trillion

The federal government increased its borrowing from domestic investors by 90.5 percent year-on-year (YoY), to ₦24.7 trillion in the eight months leading up to August 2026, up from ₦12.98 trillion during the same period in 2025 (8M’25).

Data from the government’s various public finance sources also showed that credit to the government grew more than four times faster than credit to the private sector during the same period. These figures come from the Debt Management Office (DMO) and the Central Bank of Nigeria (CBN)’s current reports.

This development coincides with a significant rise in government revenue, as reported by key agencies including the Nigerian Revenue Service, Nigerian Customs Service, and Nigerian National Petroleum Company Limited, among others. Besides the substantial revenue inflows, public concerns focus on savings from petrol subsidy removal and large naira cash inflows from floating the exchange rate.

Many public commentators point to extra-budgetary spending and other unaccounted fiscal exposures that worsen the government’s cash-flow issues, possibly forcing extensive borrowing domestically and internationally. The latest CBN data show that credit to the government increased by 43 percent YoY to ₦33.92 trillion in July 2026, from ₦23.69 trillion in July 2025. In contrast, credit to the private sector grew by only 9.6 percent YoY to ₦83.43 trillion in July 2026, up from ₦76.13 trillion in July 2025. This means credit to the government is growing 4.5 times faster than credit to the private sector. The surge in FG’s borrowing mainly stems from increased issuance of FGN Bonds, FGN Savings Bonds, and Nigerian Treasury Bills (NTBs).

Further analysis reveals that borrowing through FGN bonds jumped by 145 percent YoY to ₦7.78 trillion in 8M’26, from ₦3.18 trillion in 8M’25. Similarly, NTBs increased by 78.6 percent YoY to ₦16.92 trillion in 8M’26, up from ₦9.47 trillion in 8M’25, while borrowing through FGN Savings Bonds rose by 22 percent YoY to ₦40.56 billion in 8M’26, from ₦33.18 billion in 8M’25.

Experts who spoke with Financial attributed the sharp rise in borrowing to the government’s greater financing needs amid a significant fiscal deficit, higher expenditure, and increasing debt-service obligations. They also expressed concerns that the government’s growing appetite for domestic debt could squeeze businesses and households out of credit markets, potentially leading to higher borrowing costs for private sector players and reducing funds available for infrastructure, education, and health.

Regarding the 2026 fiscal outlook, the government intends to spend ₦68.32 trillion, against revenue of ₦36.87 trillion, resulting in a fiscal deficit of ₦31.45 trillion. Of this deficit, ₦29.20 trillion is expected to be funded through domestic and external borrowing, with the rest covered by multilateral and bilateral project loans and privatization proceeds. The ₦24.7 trillion borrowed in 8M’26 accounts for 84.7 percent of the ₦29.2 trillion domestic borrowing target, leaving around ₦4.5 trillion for the remaining four months. At an average monthly borrowing rate of ₦3.08 trillion from January to August, maintaining this pace could see the government surpass its annual borrowing target.

Ayodeji Ebo, CEO of MDU Capital Ltd, explained that the increase in borrowing reflects the government's larger financing needs due to high debt-service costs, recurrent expenses, infrastructure, and security requirements, as well as a persistent fiscal deficit despite improved revenue. He also suggested that the government may be relying more on the domestic market to limit exposure to foreign exchange risks. However, Ebo cautioned that some NTB issuance involved refinancing maturing obligations rather than new borrowing. Ayodele Akinwunmi, Chief Economist at United Capital Plc, pointed out that infrastructure spending and the need to bridge fiscal gaps drive borrowing increases. He highlighted the importance of infrastructure development nationwide, including roads, railways, education, healthcare, and security, which contribute to a more conducive business environment.

He noted Nigeria’s infrastructure deficit is estimated at about $2.3 trillion by 2043, with an annual financing gap of roughly $100 billion. Building a strong infrastructure base is vital for economic competitiveness, job creation, and inclusive growth.

Ebo also discussed how the rise in government securities provides attractive, risk-free investment opportunities for investors but risks crowding out private sector credit, raising borrowing costs, and slowing private investment and job creation. Nnamdi Nwizu, co-founder of Comecio Partners, added that increased domestic borrowing benefits investors through high yields but burdens businesses due to banks’ preference for government securities. Higher yields benefit savers but also increase government debt-service costs, which ate over N3 trillion in interest payments in the first quarter alone, diverting funds from essential public services.

Although revenues have risen, experts warn that spending has grown faster, widening the fiscal deficit. The Gross Registered Tonnage (GRT) of ocean vessels increased by 22.2 percent, with more service boat operations and container traffic up significantly, reflecting robust maritime activities.

Nwizu pointed out that even with extra revenue from subsidy savings and higher oil prices, government spending continues to outpace revenue growth, expanding the deficit. He emphasized that instead of reducing borrowing, the government is expanding its budget and relying heavily on debt.

Head of Quest Merchant Bank’s Equity Research, Tunde Abidoye, echoed concerns that despite improved revenue from subsidy reforms and higher oil prices, expenditure growth exceeds income, leading to a widening gap. He noted that from June 2023 to December 2025, government spending was N30.6 trillion, while revenue was only N20.4 trillion, resulting in a N10.2 trillion shortfall.

CPPE CEO Muda Yusuf linked the increased borrowing to the large size of the 2026 budget, which exceeds N60 trillion, and rising costs due to exchange rate movements and higher debt servicing costs. He warned that increased borrowing raises debt-service costs and limits the government’s capacity to fund other vital projects. Rising debt payments could crowd out capital projects and hamper overall budget implementation.

Nwizu also highlighted that interest payments on domestic debts exceeded N3 trillion in the first quarter alone, funds which could otherwise support infrastructure, healthcare, and education.

Experts project that the federal government’s domestic borrowing could reach between N30 trillion and N34 trillion by year-end. Ebo estimated that under a cautious scenario, full-year borrowing should be around N29 trillion, but refinancing needs and revenue shortfalls could push this number to between N30 trillion and N33 trillion. Nwizu warned that continued overspending might push borrowing up to N34 trillion.

The borrowing target was already revised upward from N17.9 trillion to about N29.2 trillion.

Regarding alternative funding measures, Yusuf stressed the importance of revenue reforms and public-private partnerships (PPPs). He explained that increasing revenue would reduce the need to borrow, and PPPs could handle projects that private entities can undertake without overburdening government finances. Properly monetizing government assets and ensuring they generate adequate returns is also crucial for improving government revenue.