FG’s Domestic Borrowing Hits N24.7trn as Businesses Face Rising Credit Pressure

Nigeria’s federal government has sharply increased its reliance on the domestic debt market, with borrowing from local investors reaching N24.7 trillion between January and August 2026, a 90.5 per cent increase compared with the N12.98 trillion recorded during the same period in 2025.

The scale of the increase is raising fresh concerns about the availability and cost of credit for businesses and households, particularly as government borrowing is growing considerably faster than lending to the private sector.

Data from the Debt Management Office (DMO) and the Central Bank of Nigeria (CBN), as cited in the source report, indicate that the government’s growing demand for funds is becoming an increasingly important feature of Nigeria’s financial system.

Government credit is expanding far faster than private-sector lending

The widening gap between government and private-sector credit is one of the clearest indicators of the pressure emerging in the domestic financial market.

CBN money and credit data showed that credit to the government increased by 43 per cent year-on-year, rising from N23.69 trillion in July 2025 to N33.92 trillion in July 2026.

Private-sector credit, meanwhile, increased by only 9.6 per cent, from N76.13 trillion to N83.43 trillion over the same period.

In other words, government credit grew about 4.5 times faster than credit to the private sector.

For businesses already dealing with high operating costs, elevated interest rates and difficult economic conditions, the development could make access to affordable financing even more challenging.

What is driving the increase in borrowing?

The federal government’s domestic borrowing has been concentrated mainly in three instruments: Federal Government of Nigeria (FGN) bonds, Nigerian Treasury Bills (NTBs) and FGN Savings Bonds.

FGN bond borrowing recorded one of the largest increases, climbing by 145 per cent year-on-year to N7.78 trillion in the first eight months of 2026, compared with N3.18 trillion during the corresponding period of 2025.

Borrowing through Treasury Bills rose by 78.6 per cent, reaching N16.92 trillion from N9.47 trillion.

FGN Savings Bonds also increased, although at a much slower pace, rising by 22 per cent to N40.56 billion from N33.18 billion.

Financial analysts cited several factors behind the increase, including the government’s large fiscal deficit, rising expenditure, debt-service obligations, infrastructure requirements and security spending.

There is also another important distinction.

Not all Treasury Bill issuance necessarily represents entirely new spending. According to Ayodeji Ebo, Chief Executive Officer of MDU Capital Ltd, some NTB issuance reflects the refinancing or rollover of maturing obligations.

That means the headline issuance figure should not automatically be interpreted as N24.7 trillion in entirely new government expenditure.

Nigeria’s 2026 budget leaves government with a huge financing gap

The borrowing surge becomes easier to understand when viewed against the size of the 2026 budget.

The federal government plans to spend approximately N68.32 trillion, compared with projected revenue of N36.87 trillion.

That leaves a fiscal deficit of N31.45 trillion.

Of the deficit, about N29.2 trillion is expected to be financed through domestic and external borrowing, while other funding is expected to come through multilateral and bilateral project-tied loans as well as privatisation proceeds.

By August, domestic borrowing had already reached N24.7 trillion.

That represents approximately 84.7 per cent of the N29.2 trillion borrowing target.

With four months remaining in the year, only about N4.5 trillion would be left to reach that target if the figures are considered against the stated financing plan.

However, the pace of borrowing provides another warning.

The federal government borrowed an average of roughly N3.08 trillion per month between January and August. Maintaining that pace could push total domestic issuance substantially above the current target.

Analysts cited in the report believe borrowing could ultimately reach between N30 trillion and N34 trillion, depending on government spending, revenue performance and refinancing requirements.

Why businesses are particularly concerned

Government securities are generally attractive to banks, pension funds, money-market funds and other institutional investors because they offer relatively predictable returns and are considered lower-risk investments.

That creates a difficult trade-off for the private sector.

When government securities offer attractive yields, financial institutions may have less incentive to assume the greater risk associated with lending to businesses.

Ayodeji Ebo warned that increased government borrowing could therefore crowd out private-sector borrowers, potentially keeping business and household borrowing costs elevated.

The consequence could extend beyond individual companies.

Higher financing costs can discourage businesses from expanding production, purchasing equipment, hiring additional workers or opening new locations. Smaller businesses, which often have fewer financing options, may be particularly vulnerable.

Nnamdi Nwizu, Co-Founder of Comecio Partners, similarly noted that investors have benefited from higher yields on government securities, while businesses face the possibility of reduced access to credit.

For savers and investors, however, the situation has a different side.

Higher yields can provide better returns through money-market investments, Treasury Bills and FGN Savings Bonds.

The same borrowing strategy that creates pressure for businesses can therefore simultaneously create opportunities for investors seeking fixed-income returns.

More revenue has not eliminated the borrowing problem

One of the biggest questions surrounding the government’s borrowing programme is why borrowing remains so high despite increased government revenue.

Nigeria has experienced substantial changes in its revenue position following reforms involving taxation, oil-sector earnings, exchange-rate adjustments and the removal of petrol subsidies.

The government has also benefited from savings associated with the removal of fuel subsidies, with the report citing N5.4 trillion in federal government savings from subsidy removal.

But analysts argue that increased revenue has been accompanied by even faster expenditure growth.

Nnamdi Nwizu said additional revenue and higher oil prices had not translated into a proportionate reduction in borrowing because government spending had expanded.

Data cited by Tunde Abidoye, Head of Equity Research at Quest Merchant Bank, showed that government expenditure reached N30.6 trillion between June 2023 and December 2025, compared with realised revenue of N20.4 trillion.

That represented a financing gap of N10.2 trillion over the period.

At the same time, Abidoye noted that stronger revenue mobilisation, supported by relatively elevated crude oil prices and ongoing tax reforms, has improved Nigeria’s fiscal position.

The issue, therefore, is not simply whether government revenue is rising. The bigger question is whether revenue is growing fast enough to keep pace with expenditure and debt obligations.

Debt servicing could become an even bigger pressure point

Another concern is the amount of government revenue that must increasingly be devoted to servicing debt.

Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), said the expansion of the 2026 budget, combined with exchange-rate movements and the cost of servicing domestic and external obligations, has increased pressure on government finances.

His concern is straightforward: money used to service debt cannot simultaneously be used for other priorities.

As debt-service obligations increase, the government could face tougher choices between servicing existing obligations and financing infrastructure, healthcare, education and other public programmes.

Nwizu also pointed to government interest payments exceeding N3 trillion in the first quarter, arguing that such resources could otherwise support essential sectors of the economy.

The concern becomes more significant if borrowing continues to rise without a corresponding improvement in the government’s ability to generate sustainable recurring revenue.

Infrastructure spending makes the borrowing debate more complicated

Not all government borrowing necessarily produces the same economic outcome.

Ayodele Akinwunmi, Chief Economist at United Capital Plc, argued that the economic impact should also be judged by what the borrowed funds are used to finance.

Nigeria has substantial infrastructure needs, including roads, railways, healthcare, education, security and other public facilities.

Akinwunmi pointed to Nigeria’s large infrastructure financing gap and argued that government cannot rely solely on annual budgetary allocations to close it.

This creates a difficult policy balance.

Borrowing to finance productive infrastructure can potentially support economic growth, improve productivity and create jobs over time.

But borrowing to finance recurring expenditure, refinancing obligations or persistent budget shortfalls without sufficient economic returns can increase the debt burden without creating enough additional revenue to service it.

For Nigeria, the crucial issue is therefore not simply how much the government borrows, but what the borrowed money ultimately produces.

What could happen between now and December?

The federal government’s domestic borrowing programme could remain under pressure for the rest of 2026.

Ayodeji Ebo estimated that borrowing could finish close to the N29 trillion range if the government remains aligned with its target. However, refinancing requirements and possible revenue shortfalls could push gross domestic issuance to between N30 trillion and N33 trillion.

Nwizu placed the base-case estimate around N30 trillion, but said borrowing could climb as high as N32 trillion to N34 trillion if government expenditure continues to exceed revenue expectations.

This means the final figure will depend heavily on three factors: government spending, revenue performance and the amount of maturing debt that needs to be refinanced.

Government may need to look beyond borrowing

Economists have suggested that Nigeria’s fiscal challenge cannot be solved indefinitely through additional debt.

Muda Yusuf identified stronger revenue mobilisation as one of the major alternatives. Improving the efficiency and reach of tax collection could increase government income without necessarily increasing borrowing at the same pace.

Public-private partnerships could also reduce the amount of infrastructure financing that must come directly from government.

Under such arrangements, private capital can be deployed to projects that have viable commercial or long-term revenue potential, reducing the immediate financing burden on the government.

Another option is better commercialisation of government-owned assets.

Rather than allowing public assets to remain underutilised, the government could seek ways to generate sustainable returns from them.

Why this matters to Nigerians

The borrowing figures may appear to be an issue primarily for economists and financial markets, but the consequences can reach ordinary Nigerians.

For businesses, increased government demand for credit could mean tougher competition for financing and potentially higher borrowing costs.

For investors and savers, higher yields on government securities can create more attractive fixed-income opportunities.

For the government, however, continued borrowing creates a growing future obligation to repay both principal and interest.

The central question for the remainder of 2026 is whether Nigeria can convert increased borrowing into economic growth and productive assets quickly enough to justify the additional debt burden.

If borrowing continues to accelerate while expenditure remains ahead of revenue, pressure on future budgets could intensify.

But if borrowed funds are channelled efficiently into infrastructure and other investments capable of expanding economic activity and government revenue, the impact could be considerably different.

For businesses watching the cost of credit and for investors tracking government securities, the direction of domestic borrowing will therefore remain one of the most important economic indicators to monitor through the final months of 2026.