FG Domestic Borrowing Jumps 90% to N24.7tn, Raising Concerns for Businesses

The Federal Government’s borrowing from domestic investors rose sharply by 90.5 per cent year-on-year to N24.7 trillion between January and August 2026, up from N12.98 trillion recorded during the same period in 2025.

The increase has raised concerns among economic experts over the potential impact on businesses and households, particularly as government borrowing continues to grow faster than lending to the private sector.

Financial Vanguard’s analysis of data from the Debt Management Office (DMO) and the Central Bank of Nigeria (CBN) showed that credit to the government expanded significantly faster than credit to private-sector operators during the period.

CBN data revealed that credit to the government increased by 43 per cent year-on-year, reaching N33.92 trillion in July 2026 from N23.69 trillion in July 2025. In contrast, credit to the private sector grew by just 9.6 per cent, from N76.13 trillion to N83.43 trillion.

This means government credit expanded about 4.5 times faster than private-sector credit.

The rise in domestic borrowing was largely driven by increased issuance of Federal Government bonds, Nigerian Treasury Bills (NTBs) and FGN Savings Bonds.

Borrowing through FGN bonds climbed by 145 per cent to N7.78 trillion in the first eight months of 2026, compared with N3.18 trillion in the corresponding period of 2025.

Similarly, borrowing through NTBs rose by 78.6 per cent from N9.47 trillion to N16.92 trillion. FGN Savings Bonds also increased by 22 per cent, from N33.18 billion to N40.56 billion.

Experts Warn of Pressure on Businesses

Economic experts attributed the surge in borrowing to the government’s growing financing needs, large fiscal deficit, higher expenditure and rising debt-service obligations.

Chief Executive Officer of MDU Capital Ltd, Ayodeji Ebo, said the government’s financing requirements had increased due to debt-service costs, recurrent spending, infrastructure projects, security needs and the continued fiscal deficit.

He noted that the government could also be relying more heavily on domestic borrowing to reduce exposure to foreign exchange risks. However, Ebo cautioned that not all Treasury Bill issuance should be regarded as fresh borrowing because some of it represents refinancing or rollover of maturing obligations.

Chief Economist at United Capital Plc, Ayodele Akinwunmi, said infrastructure development and the need to finance fiscal deficits were among the major reasons for the increased borrowing.

He argued that the effect of government borrowing should also be considered alongside the infrastructure projects being financed, noting that Nigeria still faces a huge infrastructure financing gap.

According to Akinwunmi, investment in roads, railways, education, healthcare and security could improve the business environment, create jobs and support economic growth.

Businesses Face Higher Borrowing Costs

Ebo warned that the government’s increased presence in the domestic debt market could crowd out private-sector borrowers.

He explained that banks and institutional investors may prefer government securities because they offer attractive and relatively low-risk returns, reducing the incentive to lend to businesses.

“This raises borrowing costs for companies and households, potentially slowing private investment, consumption and job creation,” he said.

Co-founder of Comecio Partners, Nnamdi Nwizu, also said the increased borrowing had created both winners and losers.

According to him, pension funds, banks and money-market investors benefit from the high yields offered by government securities. However, businesses face increased borrowing costs because financial institutions can earn attractive returns by investing in government debt.

Nwizu also expressed concern about the rising cost of servicing government debt, noting that more than N3 trillion was spent on interest payments in the first quarter alone.

He said such funds could otherwise have been used for infrastructure, healthcare and education.

FG’s 2026 Borrowing Target Under Pressure

Under the 2026 budget, the Federal Government plans to spend N68.32 trillion against projected revenue of N36.87 trillion, leaving a fiscal deficit of N31.45 trillion.

About N29.2 trillion of the deficit is expected to be financed through domestic and external borrowing, while other funding sources include multilateral and bilateral project-linked loans as well as proceeds from privatisation.

The N24.7 trillion already borrowed domestically in the first eight months represents about 84.7 per cent of the N29.2 trillion borrowing target.

This leaves approximately N4.5 trillion to be raised during the remaining four months of the year.

At the current average borrowing rate of about N3.08 trillion monthly, however, the government could exceed its annual borrowing target if the pace continues.

Why Government Borrowing Is Rising

Ayodeji Ebo said the increase reflects the government’s larger financing requirements, particularly the cost of servicing existing debts and funding infrastructure and security.

Akinwunmi also identified infrastructure spending and fiscal deficits as major drivers.

Meanwhile, Nwizu argued that government expenditure had continued to grow faster than revenue despite increased earnings from reforms, including the removal of fuel subsidies.

He said the additional revenue had not translated into lower borrowing because the government had also expanded overall expenditure.

Head of Equity Research at Quest Merchant Bank, Tunde Abidoye, similarly noted that increased spending had outpaced revenue generation.

He said government expenditure between June 2023 and December 2025 stood at N30.6 trillion, compared with realised revenue of N20.4 trillion, leaving a financing gap of N10.2 trillion.

However, Abidoye acknowledged that stronger revenue mobilisation, higher crude oil prices and ongoing tax reforms had improved the government’s fiscal position.

Debt Service Could Limit Government Spending

Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, identified the size of the 2026 budget as a major factor behind the increased borrowing.

He also pointed to exchange-rate movements, which have increased the naira cost of some government projects and external debt obligations.

Yusuf warned that rising borrowing would inevitably increase debt-servicing costs and could reduce the funds available for other government programmes.

He said debt servicing takes priority, meaning a larger portion of government revenue would have to be committed to meeting debt obligations before other expenditures could be funded.

Nwizu similarly noted that the rising interest burden could limit spending on infrastructure, healthcare and education.

FG Could Borrow Up to N34tn

Experts expect domestic borrowing to increase further before the end of 2026.

Ebo projected that borrowing could end the year at around N29 trillion if the government remains aligned with its target. However, refinancing needs and possible revenue shortfalls could push gross domestic borrowing to between N30 trillion and N33 trillion.

Nwizu estimated that borrowing could close at around N30 trillion but warned that the figure could rise to between N32 trillion and N34 trillion if government expenditure continues to exceed revenue projections.

The government’s borrowing target has already been revised upward from the initial N17.9 trillion to approximately N29.2 trillion.

Experts Suggest Alternative Funding Sources

Muda Yusuf urged the government to strengthen revenue generation and explore alternatives to borrowing.

He advocated for stronger revenue reforms, greater use of public-private partnerships and improved commercialisation of government-owned assets.

According to him, projects that can be handled by private investors should not necessarily be financed entirely by government borrowing.

He also called for government assets to be managed more efficiently so they can generate greater returns and reduce pressure on public finances.

The experts agreed that while borrowing may be necessary to fund critical infrastructure and bridge fiscal gaps, excessive reliance on domestic debt could increase financing costs for businesses, limit private-sector credit and place additional pressure on government finances.