The Federal Government has forecast revenue of N50.74tn for 2026 and is targeting an economic growth rate of 4.68 per cent, but its proposed deficit for the year has ballooned to a level that surpasses the entire 2022 national budget by N2.78tn, The PUNCH reports.

The size of the gap suggests that the government plans to borrow roughly 16.1 per cent more than the total national spending in 2022. Analysts say this expanding deficit, combined with rising debt servicing costs, indicates that 2026 may be a tougher fiscal year.

Experts warn that Nigeria could drift deeper into fiscal difficulties unless the government reins in expenditure, improves efficiency and restores a credible budget timeline. They caution that widening deficits, irregular budget cycles and growing debt commitments threaten the modest economic stability achieved recently and could intensify burdens on citizens and businesses next year.

The development follows the Federal Executive Council’s approval of the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper. After Wednesday’s meeting, the Minister of Budget and Economic Planning, Atiku Bagudu, addressed State House correspondents and confirmed that the document would be sent to the National Assembly on Monday.

Bagudu said the draft plan uses a conservative oil price assumption of $64.85 per barrel and an exchange rate of N1,512 to the dollar for 2026. He noted that the estimates were informed by engagement with ministries, private sector leaders, civil society and development partners.

For the first time, the government adopted two crude production metrics: the oil sector has been tasked with producing 2.06 million barrels per day, while a more cautious benchmark of 1.8 million barrels per day will shape the budget. The 12.6 per cent difference is intended as a buffer in case of output shortfalls. Bagudu explained that although $64.85 is below Nigeria’s usual Bonny Light price, the government needed to be prudent.

He projected 4.68 per cent GDP growth in 2026 and cautioned that pre-election spending could increase pressure on the naira, saying, “Given that 2026 is a pre-election year, there is a lot of election activity spending that can typically affect the exchange rate.”

Bagudu listed expected Federation revenues for 2026 at N50.74tn—N22.60tn for the Federal Government, N16.30tn for states and N11.85tn for local governments. Total Federal Government revenue from all sources is estimated at N34.33tn, which includes N4.98tn from government-owned enterprises. He added that this figure is 16 per cent lower than the 2025 projection.

Key spending items include about N3tn in statutory transfers, N15.27tn for non-debt recurrent expenses, and N15.91tn for debt servicing. With a total spending plan of N54.43tn, debt servicing alone will account for 29.2 per cent of the budget—nearly three out of every ten naira spent.

The proposed deficit of N20.10tn represents 36.9 per cent of total expenditure, meaning the government intends to borrow more than one-third of its planned spending. By comparison, the 2025 budget signed by President Bola Tinubu is N54.99tn, with a deficit of N9.22tn and debt service of N14.32tn. The 2026 deficit is therefore more than twice the current year’s figure—a 118 per cent jump.

The amended 2022 budget under former President Muhammadu Buhari was N17.32tn, with N3.98tn allocated to debt service. The 2026 debt service estimate of N15.91tn is N11.93tn higher—an increase of roughly 299 per cent over four years. Recurrent expenditure has also risen dramatically, from N7.11tn in 2022 to N15.27tn in 2026, up 115 per cent, while capital spending has expanded much more slowly.

Bagudu explained that the new framework considered 2025 budget performance and incorporated feedback from key sectors. He said President Tinubu had secured National Economic Council backing for better coordination between fiscal and monetary policies. According to him, “[The President] called for more collaboration and coordination between fiscal and monetary policies and sought the approval of the National Economic Council to invest more in security spending, in particular, the rehabilitation of training institutions of security agencies.”

He added that FEC approved heightened “Federation vigilance to eliminate revenue loss from illegal activities in the oil and gas sectors as well as critical mineral sectors,” along with plans for “critical minimum transformational investment for infrastructure” through the Renewed Hope initiative and efforts to raise domestic production.

Bagudu noted that the memo was submitted by the Director-General of the Budget Office with the support of his team and the Economic Management Team after “technical discussions, bilateral engagement as well as expert consultations” to ensure the framework reflects “collective aspiration.”

The MTEF/FSP, which provides a three-year fiscal roadmap, sets the parameters for the 2026 Appropriation Bill, including oil benchmarks, revenue targets, deficit ceilings and spending priorities.

Economists have expressed alarm over the proposed N20.10tn deficit for 2026, arguing that the scale of borrowing, late budget preparation and persistent disruption of the fiscal calendar could destabilise the macroeconomy and increase uncertainty for investors.

In separate interviews with The PUNCH, they said the deficit—which amounts to over a third of the N54.43tn spending plan—raises fresh concerns about debt sustainability, fiscal prudence and the government’s ability to contain inflation and exchange rate pressures.

The Centre for the Promotion of Private Enterprise CEO, Dr Muda Yusuf, said Nigeria must be careful not to undermine its recent progress. He warned that rising deficits and debt obligations could trap the country, saying “we need to worry about debt sustainability” because “high levels of deficits and high levels of debt… can choke the fiscal space and lead to a kind of vicious circle of debt.”

He added that the economy has only just regained some stability and that any setback could intensify inflation and currency volatility. In his words, “we already have a reasonable level of macroeconomic stability” and “once we lose that recovery… it will create even more problems because that is where the problem of inflationary pressure will come and that is where the pressure on the exchange rate will come.”

Yusuf noted that the government has reported improved revenue performance and urged it to use this momentum to reduce the deficit rather than expand it. He advised that Nigeria should “leverage on the improved revenue situation to moderate the level of deficit and the level of debt exposure so that we don’t put at risk the macroeconomic stability that we have achieved.”

He stressed that the economy could face severe consequences if macroeconomic stability is compromised.

Professor Sheriffdeen Tella of Olabisi Onabanjo University criticised the government for drafting the 2026 budget even though the implementation of the 2025 budget had barely commenced. He questioned the basis of the N20tn deficit projection when the current budget had not produced performance data. He argued that “the budget of 2026 is supposed to be premised on the implementation or performance of 2025,” yet “they have just started implementing the 2025 budget… in December 2025.”

According to Tella, “there is no basis for any budget because what they had, they have not implemented,” insisting that the government should have extended the 2025 framework instead of creating a new one. He warned that Nigeria risked running several budgets at once, calling it evidence of fiscal disorder. He added that “putting a deficit that is more than the budget of a year… means there is no basis for that. They just cook up figures and put them out to the public, which is wrong.”

He described the trend as damaging to the credibility of the budgeting system.

The President of the Nigerian Economic Society, Professor Adeola Adenikinju, also faulted the government for failing to adhere to the January–December budget cycle. He said the delayed approval of the MTEF/FSP shows that the country is falling behind again, undermining predictability and complicating economic planning. According to him, “The 2026 budget should have been in the National Assembly for consultation so that we can keep to this January 1st thing. That makes our fiscal system predictable.”

He warned that the rush to pass budgets “does not allow for proper analysis” and restricts ministries from adequately defending their proposals. He cautioned that “we are running two or three budgets in the same year,” which creates confusion.

Adenikinju expressed concern over how the government intends to fund the large deficit and reminded officials that the Fiscal Responsibility Act caps budget deficits at three per cent of GDP. He said, “Our budget deficit should stay below three per cent of GDP… so if you are going beyond that, really you are violating the law.”

He added that borrowing heavily from local markets would push up interest rates because “if you borrow from the public… interest rates will go up,” as banks may choose to lend to the government rather than businesses, thereby stifling investment and worsening economic difficulties.

Adenikinju also questioned whether government spending was productive. He noted that while debt can be useful for development, the late release of capital funds undermines impact. He pointed out that “if for a whole year, you are releasing your capital budget two months to the end of the year… contractors are having a lot of issues,” while the government still claims that revenue targets are on track. He warned that continued borrowing without meaningful development results will worsen inflation and exchange rate instability.