Nigeria’s Debt Crisis Deepens: Budget Deficit Hits N23.85 Trillion Amid Rising Borrowing
Nigeria’s public debt burden has escalated dramatically over the past decade, with the budget deficit soaring from N2.2 trillion in 2016 to a staggering N23.85 trillion in 2026 — a near 10-fold increase. Debt servicing has also jumped, rising from N1.48 trillion to N15.52 trillion, while federal expenditure climbed from N6.08 trillion to N58.18 trillion, according to data reviewed by BusinessDay from BudgIT. These figures highlight the growing pressure on Nigeria’s finances and the urgent need for fiscal reforms.
Finance Minister Wale Edun has repeatedly emphasised domestic resource mobilisation as a key strategy to reduce the country’s reliance on borrowing. While debt remains manageable in absolute terms compared to other emerging markets, its servicing now consumes a significant portion of government spending. In 2026, more than one in every four naira spent by the government goes to paying interest, a slight improvement from previous years but still a concern for investors and multilateral lenders.
Revenue growth has been encouraging, particularly in non-oil sectors. In 2025, Nigeria exceeded tax collection targets, gathering N28 trillion thanks to improved compliance, digitalisation, and a broader tax base. Yet, expenditure continues to outpace revenue. The projected deficit-to-revenue ratio of about 70 percent in 2026 underscores that for every N100 earned, the government plans to borrow around N70, keeping Nigeria on a borrowing trajectory despite fiscal gains.
Experts caution that without stricter spending discipline, debt will remain a structural challenge. Analysts from BudgIT and S&P Global Ratings note that while reforms are directionally positive, the high cost of debt servicing limits fiscal flexibility. Domestic observers argue that borrowing is increasingly a result of fiscal arithmetic rather than policy choice, with expenditure growth consistently outstripping revenue increases.
For investors, Nigeria’s strategy is clear: grow the economy to manage debt rather than default. Minister Edun’s focus on raising the tax-to-GDP ratio to 18 percent over the next two years represents a roadmap to reduce reliance on borrowing. However, without slowing expenditure growth or lowering debt servicing costs, deficits are likely to remain entrenched, keeping borrowing an inescapable part of Nigeria’s budgetary landscape.
source: Business day