By Emmanuel Ntekim
The Federal Government’s rising debt burden has come under fresh scrutiny after domestic borrowing climbed to N8.1 trillion in the first quarter of 2026, exceeding the pro-rated quarterly target and raising fears of deeper fiscal stress.
The Q1 figure represents a 7.4 per cent increase over the N7.5 trillion borrowed in the corresponding period of 2025, signalling persistent revenue shortfalls and a widening dependence on the domestic debt market.
Financial analysts warn that if the trend continues, the government may overshoot its N29.2 trillion full-year borrowing plan, especially after the recent approval of $6 billion in fresh external loans.
The borrowing spike was largely driven by aggressive issuance of FGN Bonds, which rose 63 per cent year-on-year to N3.18 trillion, while Treasury Bills fell 12 per cent to N4.86 trillion.
The development has intensified concerns that Nigeria may be edging closer to a debt trap, where fresh loans are increasingly used to service maturing obligations.
World Bank raises red flag
The World Bank, in its latest Nigeria Development Update, warned that the country’s rising debt-service burden is steadily eroding government capacity to fund critical infrastructure.
According to the report, Nigeria’s debt service-to-revenue ratio stood at 49.5 per cent in 2025, leaving little room for roads, power, education and healthcare.
As a result, capital spending declined from 1.3 per cent of GDP in 2024 to 1.0 per cent in 2025, while only 24 per cent of the prorated 2025 capital budget of MDAs was implemented.
Why borrowing is rising
Experts attribute the development to: weak oil revenue performance, underwhelming tax receipts, budget expansion amid weak earnings, rising recurrent expenditure, and high debt servicing costs
They noted that when revenue consistently falls below target, borrowing becomes government’s default response.
Impact on economy
Economists say sustained domestic borrowing could worsen: inflationary pressure, crowding out of private sector credit, high interest rates, exchange rate instability, and weak infrastructure delivery
However, some insist that borrowing can still be positive if channelled into productive sectors capable of generating long-term returns.
More loans ahead
With revenue still under pressure and fiscal reforms yet to fully yield results, analysts expect borrowing through the domestic bond market to remain elevated through the rest of 2026.
Unless stronger revenue mobilisation and tighter fiscal discipline are enforced, Nigeria’s public debt profile may continue to rise sharply.
“Nigeria’s debt challenge is no longer about size alone, but the growing cost of servicing it and the damage it is doing to infrastructure and development spending.”
Q1 2026 borrowing: N8.1trn
2026 annual borrowing plan: N29.2trn
Debt stock (Q3 2025): N153.29trn
Debt service-to-revenue ratio: 49.5%
Fresh external loans approved: $6bn
The immediate policy challenge for the Federal Government is balancing deficit financing with growth priorities. Without stronger oil earnings, tax reforms and expenditure controls, the debt burden may increasingly undermine long-term economic recovery.
