FG’s N24.7trn Borrowing Surge Sparks Fresh Squeeze on Businesses

BY FRONTLINE REPORTERS

The Federal Government’s domestic borrowing surged by 90.5 per cent year-on-year to N24.7 trillion in the first eight months of 2026, up from N12.98 trillion recorded during the corresponding period of 2025. The sharp increase has raised concerns that the government’s growing appetite for funds from the domestic market could further squeeze businesses and households out of available credit.

Data from the Debt Management Office and the Central Bank of Nigeria showed that government credit rose by 43 per cent to N33.92 trillion in July 2026, compared with N23.69 trillion a year earlier, while credit to the private sector increased by only 9.6 per cent to N83.43 trillion. Government credit therefore grew about 4.5 times faster than private-sector credit. The borrowing was driven mainly by increased issuance of FGN Bonds and Nigerian Treasury Bills, with FGN Bond borrowing rising 145 per cent to N7.78 trillion and NTBs increasing 78.6 per cent to N16.92 trillion.

Financial experts attributed the surge to the government’s expanding financing needs, large fiscal deficit, higher expenditure, infrastructure and security requirements, as well as rising debt-service obligations. Ayodeji Ebo, Chief Executive Officer of MDU Capital Ltd, warned that banks and institutional investors could prefer government securities because of their attractive yields and relatively low risk, leaving fewer funds available for businesses. He said this could push up borrowing costs, weaken private investment and slow job creation.

The pressure is heightened by the size of the 2026 budget, which provides for N68.32 trillion in expenditure against projected revenue of N36.87 trillion, leaving a deficit of N31.45 trillion. The government plans to fund N29.2 trillion of the deficit through domestic and external borrowing. With N24.7 trillion already raised domestically by August, about N4.5 trillion remains against the current target. Experts, however, warn that total domestic borrowing could rise to between N30 trillion and N34 trillion by year-end if spending continues to outpace revenue or refinancing needs increase.

Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, warned that rising debt-service obligations could crowd out spending on infrastructure and essential services. Other experts urged the government to reduce its dependence on borrowing by strengthening revenue mobilisation, expanding public-private partnerships and commercialising government assets. While increased borrowing can finance critical infrastructure and support economic growth, analysts say its long-term benefit will depend on whether the funds are deployed productively enough to generate growth, jobs and revenue capable of easing the country’s mounting debt burden.

The Federal Government’s N24.7 trillion domestic borrowing in the first eight months of 2026 was driven mainly by three debt instruments: FGN Bonds, Nigerian Treasury Bills and FGN Savings Bonds. Borrowing through FGN Bonds rose by 145 per cent year-on-year to N7.78 trillion, from N3.18 trillion in the corresponding period of 2025, while Treasury Bills increased by 78.6 per cent to N16.92 trillion, from N9.47 trillion. Borrowing through FGN Savings Bonds also rose by 22 per cent to N40.56 billion, from N33.18 billion.

The figures show that Treasury Bills accounted for the largest share, contributing about N16.92 trillion, or 68.4 per cent, of the total domestic borrowing. FGN Bonds accounted for approximately 31.5 per cent, while FGN Savings Bonds contributed about 0.2 per cent. Combined, the three instruments amounted to roughly N24.74 trillion, consistent with the reported N24.7 trillion.

It is important to note, however, that the N24.7 trillion represents gross domestic debt issuance, not necessarily N24.7 trillion in entirely new debt. As analysts pointed out, some Treasury Bill issuance involves refinancing or rolling over maturing obligations. Therefore, the figure should not automatically be interpreted as the net addition to the Federal Government’s outstanding debt.