Businesses suffer as FG’s domestic borrowings surge 90% to N24.7trn

The federal government increased its borrowing from domestic investors by 90.5 per cent, year-on-year (YoY), to N24.7 trillion in the eight months to August 2026, against N12.98 trillion in the corresponding period of 2025 (8M’25).

Financial Vanguard findings from the government’s various public finance data also showed that credit to government grew more than four times faster than credit to the private sector during the same period. The data are generated from the Debt Management Office, DMO, and the Central Bank of Nigeria, CBN’s current reports.

These developments come against the backdrop of a massive rise in government revenue, as reported by some key agencies, including the Nigerian Revenue Service; Nigerian Customs Service; and the Nigerian National Petroleum Company Limited, among others. In addition to the massive revenue inflow, public concerns also point to savings from petrol subsidy removal, as well as massive naira cash translations from the floating of the exchange rate.

Many public commentators point to extra-budgetary spending and other unaccounted fiscal exposures as compounding the government’s cash-flow crises that may have compelled extensive borrowing across domestic and foreign windows. Meanwhile, the latest CBN data on money and credit showed that credit to the government rose by 43 per cent YoY to N33.92 trillion in July 2026 from N23.69 trillion in July 2025. But credit to the private sector grew by only 9.6 per cent YoY to N83.43 trillion in July 2026 from N76.13 trillion in July 2025. Thus, credit to the government grew 4.5 times faster than credit to the private sector. Financial Vanguard findings showed that the surge in FG’s borrowing was driven largely by increased issuance of FGN Bonds; FGN Savings Bonds; and Nigerian Treasury, NTBs.

Further breakdown showed that borrowing through FGN bonds rose by 145 per cent YoY to N7.78 trillion in 8M’26, from N3.18 trillion in 8M’25. Similarly, borrowing through NTBs increased by 78.6 per cent YoY to N16.92 trillion in 8M’26, from N9.47 trillion in 8M’25, while FGN Savings Bonds borrowing rose by 22 per cent YoY to N40.56 billion in 8M’26 from N33.18 billion in 8M’25.

Experts’ insight

Experts who spoke to Financial Vanguard attributed the sharp increase in borrowing to the government’s larger financing requirements, amid a significant fiscal deficit, higher expenditure and rising debt-service obligations. But the experts also raised concerns that the federal government’s increased appetite for domestic borrowing could squeeze businesses and households out of available credit. They also noted that the increased borrowing could lead to an increase in debt-service spending and thus reduce the government’s ability to fund infrastructure, education and health.

2026 fiscal headlines

Under the 2026 Budget, the federal government plans to spend N68.32 trillion, against revenue of N36.87 trillion, indicating a fiscal deficit of N31.45 trillion, with N29.20 trillion to be funded through domestic and external borrowing, while the remaining deficit is expected to be covered through multilateral and bilateral project-tied loans and privatisation proceeds. The N24.7 trillion borrowed in 8M’26 represents 84.7 per cent of the N29.2 trillion domestic borrowing target, leaving about N4.5 trillion for the remaining four months. At an average monthly borrowing of about N3.08 trillion between January and August, maintaining the current pace would result in the government exceeding its annual target.

Why FG is borrowing more

Chief Executive Officer, MDU Capital Ltd, Ayodeji Ebo, said the increase in borrowing reflected “larger financing requirements arising from high debt-service costs, recurrent expenditure, infrastructure and security needs, and a fiscal deficit that remains significant despite improved revenue.” He said the government might also be relying more on the domestic market to limit its foreign-exchange exposure. However, Ebo cautioned that part of the NTB issuance represented refinancing or rollover of maturing obligations and should not be interpreted entirely as fresh borrowing. Chief Economist, United Capital Plc, Ayodele Akinwunmi, said infrastructure spending and the need to bridge fiscal deficits were among the factors driving the increase in borrowing. He said the impact of the borrowing should also be assessed from the perspective of the infrastructure being financed by the government. “Across the country, we have witnessed significant growth in infrastructure development, ranging from physical projects, such as roads and railways, to soft infrastructure, including education, healthcare and security.

“These advancements have contributed positively to the ease of doing business, creating a more enabling environment for economic activity,” Akinwunmi said. He said Nigeria’s huge infrastructure financing gap meant that the government could not rely solely on annual budgetary allocations to address the deficit, noting that Nigeria’s infrastructure deficit was estimated at about $2.3 trillion by 2043, with an annual financing gap of roughly $100 billion. “Building a robust infrastructure base is essential not only for economic competitiveness but also for job creation and inclusive growth,” he said.

Govt credit grows

4.5 times faster Speaking on the impact of the increased FG’s domestic borrowing on the economy, Ebo said: “For investors, the increased supply of government securities provides attractive risk-free investment opportunities and higher yields. “However, it can crowd out the private sector because banks and institutional investors may prefer government securities to lending to businesses. “This raises borrowing costs for companies and households, potentially slowing private investment, consumption and job creation. Higher debt-service obligations may also reduce the government’s capacity to fund infrastructure and essential public services.” Similarly, Co-Founder, Comecio Partners, Nnamdi Nwizu, said the sharp rise in domestic borrowing had produced mixed effects across the economy. He stated: “Investors, particularly pension funds, banks and money market funds, have benefited from high yields on government bonds and treasury bills, which also helps explain steady FPIs flow into local markets. “However, this comes at a cost to businesses because banks can earn safe, attractive returns by lending to the government; they have less incentive to lend to the private sector, which keeps borrowing costs high for businesses. “For households, higher yields mean better returns on savings products like money market funds and FGN Savings Bonds, but the flip side is rising debt-service costs for the government. “The total money spent on interest payments was over N3 trillion in Q1 alone, which is money not available for infrastructure, healthcare or education, which ultimately affects ordinary Nigerians.”

Revenue rises but spending grows faster

The experts also raised concerns over the fiscal implication of the inSimilarly, the Gross Registered Tonnage (GRT) of ocean-going vessels increased from 40.87 million tonnes to 49.95 million tonnes, representing a growth of 22.2 per cent. Service boat operations also increased during the Maritime Reforms: Nigeria’s ports record 12.3% rise in cargo throughput By Emeka Anaeto quarter. The number of service boats completed rose by 22.3 per cent, from 3,554 to 4,347, while the associated Gross Registered Tonnage increased by 62.4 per cent, from 1.06 million tonnes to 1.73 million tonnes. Container traffic increased by 11.3 per cent, rising from 541,229 TEUs in Q2 2025 to 602,392 TEUs in Q2 2026. The report stated that inward laden containers increased by 6.3 per cent, accounting for approximately 51.5 per cent of total container traffic. Outward laden containers declined marginally by 3.9 per cent, while empty container traffic increased by 13.9 per cent compared with the corresponding period of 2025. Transshipment container traffic stood at 29,038 TEUs, compared with no recorded movement during …As vessel traffic rises 14.4% creased borrowing, despite higher government revenue and the federal government’s N5.4 trillion share of savings from fuel subsidy removal. Nwizu said even with additional revenue from subsidy savings and higher oil prices, government spending had grown faster, causing the deficit to widen. “Instead of using the extra revenue to borrow less, FG has expanded the overall budget and continued to lean heavily on domestic debt to fund it,” he said. He added that some of the fiscal gains from the 2023–2024 reforms were being offset by higher spending in 2026. Head, Equity Research, Quest Merchant Bank, Tunde Abidoye, also said the sharp increase in domestic borrowing, despite improved revenue and fiscal gains from subsidy removal, suggested that expenditure growth had continued to outpace revenue generation. He noted that government spending amounted to N30.6 trillion between June 2023 and December 2025, compared with realised revenue of N20.4 trillion, resulting in a financing gap of N10.2 trillion.

Abidoye, however, said stronger revenue mobilisation, supported by elevated crude oil prices and ongoing tax reforms, had improved the government’s fiscal position.

Debt service threatens capital projects

Chief Executive Officer, Centre for the Promotion of Private Enterprise, CPPE, Muda Yusuf, said the size of the 2026 Budget was one of the biggest factors behind the increase in borrowing. “When you compare the size of this year’s budget with that of last year, there has been a significant increase. The budget this year is over N60 trillion,” Yusuf said. He added that exchange-rate movements had significantly increased the cost of capital projects, while the naira value of external debt and the cost of servicing domestic debt had also risen. Yusuf warned that increased borrowing would raise debt-service costs and reduce the government’s ability to fund other areas of the economy. “As the government borrows more, its debt-service cost also increases.

When debt servicing increases, it reduces the government’s ability to spend on other things. “Debt servicing takes priority; the government has to service its debt before it can undertake other expenditures,’’ he said. Yusuf warned that the rising debt burden was contributing to funding challenges for capital projects and some aspects of budget implementation. On his part, Nwizu noted that government interest payments on domestic debts exceeded N3 trillion in the first quarter alone, saying such funds could otherwise have been deployed to infrastructure, healthcare and education.

FG may borrow up to N34trn

Meanwhile, the experts projected that the federal government’s domestic borrowing would rise further before the end of 2026. Ebo said that under a target-aligned scenario, fullyear borrowing should close around N29 trillion. However, he said refinancing requirements and possible revenue shortfalls could push gross domestic issuance to between N30 trillion and N33 trillion. Nwizu projected that domestic borrowing could finish around N30 trillion, but warned that it could rise to between N32 trillion and N34 trillion if government spending continued to exceed revenue expectations.

“The base case would be for borrowing to finish around N30 trillion, but the risk remains tilted towards a higher figure if government spending continues to exceed revenue expectations,” he said. The borrowing target has already been revised upward from the original N17.9 trillion to about N29.2 trillion.

Revenue reforms, PPPs as alternatives

Speaking on alternative measures to funding increased government spending, Yusuf said: “If the government is able to generate more revenue, the need to borrow will be reduced. So, revenue reform is very important. “Public-private partnerships are also important. If there are projects the private sector can undertake, the government does not need to burden itself with financing them. Public-private partnerships are, therefore, another way of addressing the issue. “The third option is to ensure that government assets are properly commercialised and generate adequate returns. Improving returns from government assets is also very important. We need to improve revenue generation and ensure that government assets are yielding better returns. (Vanguard)