• Wider fiscal deficits threaten heavier debt burden

Sopuruchi Onwuka

President Bola Tinubu on Tuesday presented the 2026 Appropriation Bill to a joint session of the National Assembly, outlining plans to consolidate economic reforms, accelerate growth, and strengthen fiscal discipline, while acknowledging significant setbacks in the implementation of the 2025 budget.

The 2026 Budget, titled “The Budget of Consolidation, Renewed Resilience, and Shared Prosperity,” reflects Tinubu’s stated ambition to move Nigeria “from survival to growth” by locking in macroeconomic stability, improving the investment climate, and ensuring that economic expansion translates into jobs, higher incomes, and improved living standards.

According to the President, the budget is guided by four key objectives: consolidating macroeconomic stability, improving the business and investment environment, promoting job-rich growth and poverty reduction, and strengthening human capital development while protecting the most vulnerable.

Tinubu said the Federal Government expects total revenue of ₦34.33 trillion in 2026, against projected expenditure of ₦58.18 trillion, including ₦15.52 trillion allocated to debt servicing. Capital expenditure is projected at ₦26.08 trillion, while recurrent non-debt spending stands at ₦15.25 trillion. The projected budget deficit of ₦23.85 trillion represents 4.28 per cent of GDP.

The budget assumptions include a crude oil price benchmark of $64.85 per barrel, oil production of 1.84 million barrels per day, and an average exchange rate of ₦1,400 to the dollar.

Sectoral allocations highlight Tinubu’s priorities, with ₦5.41 trillion earmarked for defense and security, ₦3.56 trillion for infrastructure, ₦3.52 trillion for education, and ₦2.48 trillion for health.

The President said the government would pursue stronger revenue mobilization through the implementation of new National Tax Acts and continued reforms in the oil and gas sector. He added that stricter oversight of Government-Owned Enterprises and expanded digital revenue collection systems would be used to curb leakages and improve compliance.

Tinubu also promised stricter budget execution in 2026, stating that he had issued directives to key fiscal officials to ensure spending is carried out strictly in line with approved plans and timelines.

The President cited early signs of economic recovery, noting that Nigeria’s economy grew by 3.98 per cent in the third quarter of 2025, up from 3.86 per cent in the corresponding period of 2024. Inflation, he said, moderated for eight consecutive months, falling from 24.23 per cent in March 2025 to 14.45 per cent in November 2025.

He also pointed to improved oil production, expanded non-oil revenue, renewed investor confidence, and a rise in external reserves to about $47 billion, a seven-year high providing more than ten months of import cover.

Despite these gains, Tinubu acknowledged that implementation of the 2025 Budget was constrained by transition challenges and competing execution demands.

As of the third quarter of 2025, government revenue stood at ₦18.6 trillion, representing 61 per cent of the annual target, while expenditure reached ₦24.66 trillion, or 60 per cent of the target.

Capital budget implementation lagged significantly. Although ₦2.23 trillion was released for 2024 capital projects following the extension of the 2024 capital budget into 2025, only ₦3.10 trillion, or 17.7 per cent of the 2025 capital budget, had been released by the third quarter.

The President attributed the weak capital releases to the prioritization of completing ongoing 2024 projects during the transition period.

Looking ahead, Tinubu said the 2026 fiscal year would focus on tighter execution, improved revenue performance, and stronger accountability across ministries, departments, agencies, and government-owned enterprises.

He urged the National Assembly to support the budget, describing it as a practical framework to consolidate reforms, stabilize public finances, and deliver inclusive growth across Nigeria.

Oracle Intelligence reports that while President Tinubu’s budget presentation was delivered in fine and compelling narratives, the stark realities project significant fiscal risks for the future.

Our analysis showed that the 2026 federal budget presents significant fiscal risks, particularly in its deficit position. A budget deficit of ₦23.85 trillion, equivalent to 4.28 per cent of GDP, will inevitably deepen Nigeria’s debt burden and place additional strain on public finances.

With debt servicing already projected at ₦15.52 trillion, continued reliance on deficit financing means a growing share of government revenue will be committed to servicing existing obligations rather than funding development priorities. This trend limits fiscal flexibility and reduces the government’s ability to respond to economic shocks.

Persistent deficits of this scale also create wider fiscal gaps in future budgets. As borrowing increases, so do interest costs, rollover risks, and exposure to exchange rate volatility. This compounds pressure on revenues and raises the likelihood of higher taxes, reduced capital spending, or further borrowing to bridge funding shortfalls.

Without a credible path to narrowing the deficit, the current budget framework risks locking the country into a cycle of rising debt, constrained growth, and weakened fiscal sustainability. Over time, this could undermine investor confidence and erode the government’s capacity to deliver essential public services.