The Federal Government’s borrowing from domestic investors surged by 90.5 per cent year-on-year to N24.7 trillion in the first eight months of 2026, compared with N12.98 trillion recorded during the same period in 2025.
Financial Vanguard’s analysis of public finance data from the Debt Management Office (DMO) and the Central Bank of Nigeria (CBN) also showed that government credit expanded significantly faster than lending to the private sector during the period.
The sharp increase in domestic borrowing comes amid a substantial rise in government revenue reported by major agencies, including the Nigerian Revenue Service, Nigerian Customs Service and Nigerian National Petroleum Company Limited.
The government has also benefited from savings following the removal of petrol subsidies, as well as increased naira revenues linked to the floating of the exchange rate.
However, concerns have been raised over extra-budgetary spending and other fiscal obligations that may have contributed to the government’s growing financing needs.
Government Credit Grows 4.5 Times Faster Than Private Sector Lending
The latest CBN money and credit data showed that credit to the government increased by 43 per cent year-on-year to N33.92 trillion in July 2026, up from N23.69 trillion in July 2025.
In contrast, credit to the private sector rose by only 9.6 per cent to N83.43 trillion from N76.13 trillion over the same period.
This means government credit expanded 4.5 times faster than credit to the private sector, raising concerns about the potential impact of increased government borrowing on businesses and households.
The surge in government borrowing was largely driven by increased issuance of Federal Government of Nigeria (FGN) Bonds, FGN Savings Bonds and Nigerian Treasury Bills (NTBs).
Borrowing through FGN Bonds climbed by 145 per cent year-on-year 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 increased by 78.6 per cent to N16.92 trillion from N9.47 trillion, while borrowing through FGN Savings Bonds rose by 22 per cent to N40.56 billion from N33.18 billion.
Experts Explain Why FG Is Borrowing More
Financial experts attributed the sharp increase in borrowing to the government’s growing financing requirements, significant fiscal deficit, higher expenditure and rising debt-service obligations.
They also warned that increased reliance on domestic borrowing could crowd businesses and households out of available credit, while higher debt-service costs could limit government spending on infrastructure, healthcare and education.
Chief Executive Officer of 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.”
Ebo added that the government could be relying more heavily on domestic borrowing to reduce its exposure to foreign exchange risks.
However, he cautioned that some of the NTB issuance represented the refinancing or rollover of maturing obligations and should therefore not be viewed entirely as fresh borrowing.
Chief Economist at United Capital Plc, Ayodele Akinwunmi, identified infrastructure spending and the need to finance fiscal deficits as major drivers of the borrowing increase.
He said the impact of increased borrowing should also be considered in relation to the infrastructure projects 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 noted that Nigeria’s infrastructure financing gap remained substantial, making it difficult for the government to depend solely on annual budgetary allocations.
According to Akinwunmi, Nigeria’s infrastructure deficit could reach about $2.3 trillion by 2043, with an estimated 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.
How Rising Borrowing Could Affect Businesses
Ebo said the increase in government borrowing had created both opportunities and challenges for investors and the wider economy.
“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.”
Co-Founder of Comecio Partners, Nnamdi Nwizu, similarly said the sharp rise in domestic borrowing had produced mixed consequences 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 Is Rising, but Government Spending Is Growing Faster
Despite increased government revenue and fiscal gains from reforms, experts expressed concern that expenditure was rising at a faster pace.
Nwizu said additional revenue from fuel subsidy savings and higher oil prices had not translated into lower borrowing because government spending had expanded.
“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 achieved through the 2023–2024 reforms were being offset by increased government spending in 2026.
Head of Equity Research at Quest Merchant Bank, Tunde Abidoye, also said the surge in domestic borrowing despite higher revenue suggested that expenditure continued to outpace income.
He noted that government spending stood at N30.6 trillion between June 2023 and December 2025, compared with realised revenue of N20.4 trillion, leaving a financing gap of N10.2 trillion.
Abidoye, however, noted that stronger revenue mobilisation, supported by higher crude oil prices and ongoing tax reforms, had improved the government’s fiscal position.
Debt Service Raises Concerns Over Capital Projects
Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, identified the size of the 2026 Budget as one of the major reasons 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 explained that exchange-rate movements had 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 continued borrowing would push up debt-service costs and reduce the government’s ability to finance other sectors.
“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.
He added that the growing debt burden was contributing to funding difficulties for capital projects and other areas of budget implementation.
Nwizu also pointed to the government’s domestic interest payments, which he said exceeded N3 trillion in the first quarter alone. He argued that such funds could otherwise have been directed towards infrastructure, healthcare and education.
FG Could Borrow Up to N34trn in 2026
Experts expect the Federal Government’s 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 current target.
However, refinancing requirements and possible revenue shortfalls could push gross domestic issuance to between N30 trillion and N33 trillion, he said.
Nwizu placed his estimate at about N30 trillion but warned that borrowing could climb as high as N32 trillion to N34 trillion if government expenditure continues to exceed revenue projections.
“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 government’s domestic borrowing target has already been revised upward from the original N17.9 trillion to approximately N29.2 trillion.
With N24.7 trillion already borrowed during the first eight months of the year, the government has utilised about 84.7 per cent of the revised target, leaving roughly N4.5 trillion for the remaining four months.
At the average monthly borrowing pace of about N3.08 trillion recorded between January and August, the government could exceed its annual target if the current trend continues.
Revenue Reforms and PPPs Could Reduce Borrowing Pressure
Experts have also recommended alternative ways of financing government expenditure and reducing dependence on domestic debt.
Yusuf said stronger revenue generation should remain a key priority, while public-private partnerships (PPPs) could help reduce the government’s financing burden for major projects.
“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.
