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FG’s Domestic Borrowing Hits N24.7trn, Up 90% as Businesses Feel the Squeeze

Oluwatomisin Tolulope AlabiBy Updated:No Comments3 Mins Read
FG's Domestic Borrowing Hits N24.7trn, Up 90% as Businesses Feel the Squeeze

The Federal Government’s domestic borrowing jumped 90.5 per cent year-on-year to N24.7 trillion in the eight months to August 2026, up from N12.98 trillion in the same period last year, as credit to government grew more than four times faster than credit to the private sector.

Findings from the Debt Management Office and the Central Bank of Nigeria show the surge is being driven largely by FGN Bonds, FGN Savings Bonds and Nigerian Treasury Bills. Borrowing through FGN Bonds rose 145 per cent YoY to N7.78 trillion, NTBs climbed 78.6 per cent to N16.92 trillion, while FGN Savings Bonds inched up 22 per cent to N40.56 billion.

CBN data further shows credit to government rose 43 per cent YoY to N33.92 trillion in July 2026, against a 9.6 per cent rise in private sector credit to N83.43 trillion — meaning government credit growth outpaced private sector credit growth by 4.5 times.

The borrowing spree comes despite a reported rise in government revenue from agencies including the Nigerian Revenue Service, Nigerian Customs Service and NNPC, alongside savings from petrol subsidy removal and naira gains from the floated exchange rate. Analysts point to extra-budgetary spending and unaccounted fiscal exposures as compounding the cash-flow pressures pushing the government to borrow more.

Experts warn of crowding-out effect

CEO of MDU Capital, Ayodeji Ebo, attributed the rise to heavy debt-service costs, recurrent expenditure, infrastructure and security needs, and a persistent fiscal deficit, though he cautioned that part of the NTB issuance reflects rollovers of maturing debt rather than fresh borrowing. He warned that the flood of government securities could crowd out businesses, as banks and institutional investors favour risk-free government paper over lending to the private sector — raising borrowing costs for companies and households.

Co-Founder of Comecio Partners, Nnamdi Nwizu, said pension funds, banks and money market funds have benefited from high yields, but businesses pay the price as banks have less incentive to lend to them. He noted government interest payments exceeded N3 trillion in Q1 alone — money he said could otherwise have gone to infrastructure, healthcare and education.

Head of Equity Research at Quest Merchant Bank, Tunde Abidoye, said government spending totalled N30.6 trillion between June 2023 and December 2025 against N20.4 trillion in realised revenue, leaving a N10.2 trillion financing gap — though he credited stronger oil prices and tax reforms with improving the fiscal position.

CPPE CEO Muda Yusuf blamed the ballooning 2026 Budget — now over N60 trillion — and naira depreciation, which has raised the cost of capital projects and debt servicing alike. He warned that rising debt-service obligations are already limiting the government’s capacity to fund capital projects.

Borrowing could hit N34trn by year-end

The N24.7 trillion already borrowed represents 84.7 per cent of the N29.2 trillion domestic borrowing target for 2026 — a target already revised upward from an original N17.9 trillion. At the current monthly pace of about N3.08 trillion, the government is on track to exceed its annual target.

Ebo projects full-year borrowing could close around N29 trillion in a target-aligned scenario, but may reach N30–33 trillion if refinancing needs or revenue shortfalls widen. Nwizu’s base case is around N30 trillion, with risk of climbing to N32–34 trillion if spending continues to outpace revenue.

To ease reliance on borrowing, Yusuf called for stronger revenue reforms, expanded public-private partnerships for infrastructure financing, and better commercialisation of government assets to boost returns.

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