Business

Debt pressure mounts as FG borrows N8.1trn in 2026 already

Published

1 month ago

April 13, 2026

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•Represents 7.4% YoY increase from Q1’25 •Analysts cite revenue gaps, fiscal indiscipline •Urge FG to cut waste, boost revenue •Rising debt crippling ability to fund infrastructure – World Bank“

By Babajide Komolafe, Economy Editor & Peter Egwuatu, Assistant Business Editor

At the backdrop of rising public debt pressure and concerns over the impact on the economy, the Federal Government (FG) increased its domestic borrowing by N8.1 trillion in the first quarter of 2026 (Q1’26), showing a 7.4 per cent rise from N7.5 trillion in the same period of 2025.

This upward trend, according to analysts, shows revenue gaps and spending indiscipline, urging the government to double down on revenue collection, cut waste and curb corruption.

Meanwhile, the World Bank has warned that the rising amount of money the Federal Government is spending to service debt is reducing its ability to fund critical infrastructure, citing the sharp decline in capital spending to 1.0 percent of GDP from 1.3 percent of GDP in 2024.

Domestic borrowing in Q1’26

Data obtained by Financial Vanguard from the Central Bank of Nigeria, CBN, and the Debt Management Office, DMO, shows that the 7.4 per cent, year-on-year, YoY, increase in FG’s domestic borrowing in Q1’26 was driven by 63 per cent and 24 per cent YoY increase in borrowing through FGN Bonds and FGN Savings Bonds, respectively, which offset 12 per cent decline in borrowing through Treasury Bills.

FG borrowed N4.86 trillion through Treasury Bills in Q1’26, representing a 12 per cent YoY decline from N5.54 trillion in Q1’25.

However, borrowing from the monthly FGN Bond auctions rose by 63 per cent YoY to N3.182 trillion in Q1 ’26 from N1.953 trillion in Q1’25.

Similarly, borrowing through the FGN Savings Bond rose by 24 per cent YoY to N16 billion in Q1’26 from N13 billion in Q1’25.

Borrowing overshoots target

Under the Appropriation Act 2026, the Federal Government plans to borrow N29.2 trillion, to fund the gap between the revenue of N68.32 trillion and expenditure of N36.87 trillion. This indicates a quarterly borrowing target of 7.3 trillion, including external debt.

However, given the N8.1 trillion borrowed from domestic investors in Q1’26, and the $6 billion new external loans approved by the National Assembly two weeks ago, the Federal Government might again exceed its annual borrowing target in 2026.

The above trend also indicates further increases in Nigeria’s debt stock which according to the DMO, stood at N153.29 trillion at end of Q3 ’25, representing 5.9 per cent YoY increase from N144.67 trillion at end of 2024.Given this development and expected increase in total debt, the Federal Government will spend more on debt services in coming years, and likely worsening of the debt service-to revenue ratio, a key debt sustainability indicator.

Debt service undermining infrastructure spending Consequently, the World Bank has said the nation’s massive debt-service burden was systematically crippling the nation’s ability to fund critical infrastructure, effectively reducing capital investment to a “primary adjustment margin” in the federal budget.In its latest Nigeria Development Update (NDU) for April 2026, released last week, the World bank disclosed that while the debt-to-GDP ratio appears moderate, the cost of servicing that debt is suffocating.”Although Nigeria’s debt-to-GDP ratio remains low by international standards, the main source of vulnerability is the high debt service-to-revenue ratio, which is estimated to have stood at 49.5 percent in 2025,” the Bank stated.This fiscal “squeeze” has directly impacted the Federal Government’s (FGN) development goals. The report noted that: “With recurrent spending absorbing most of the available fiscal space, capital spending declined from 1.3 percent of GDP in 2024 to 1.0 percent in 2025”.The bank further revealed a staggering failure in project execution: “Capital execution was particularly weak, with only 24 percent of the prorated 2025 capital budget of MDAs implemented, leaving a significant portion of approved investment unspent and limiting the growth impact of public spending”.Warning of the long-term consequences for Nigeria’s economic future, the lender emphasised “The ratio continues to crowd out pro-growth spending, particularly on infrastructure and human capital”. Even with projected improvements, the bank cautioned that the burden will remain high: “The debt service-to-revenue ratio… will remain elevated at about 41 percent by 2028, constraining fiscal flexibility and limiting space for priority development spending”.

Revenue gaps, structural constraints drive borrowingProviding insight into the factors behind the Q1 borrowing spike, Chief Investment Officer, VNL Capital Asset Management Company, Dr. Ifeanyi Ubah, reinforced concerns over persistent revenue weakness.He said: “The most fundamental reason is that government revenue continues to fall short of expectations. When actual receipts miss targets by a wide margin, borrowing becomes the default tool to keep the lights on and meet recurrent obligations. This is not a new problem; it is a pattern that has repeated itself year after year.”Ubah added that the expansion of the 2026 budget worsened the situation.”The budget was expanded significantly mid-cycle, widening the fiscal deficit beyond what was originally planned. A larger budget with the same weak revenue base simply means more borrowing,” he said.He further noted that a significant portion of new borrowing is being used to service existing obligations.”When debt service consumes such a large share of the budget, the government finds itself in a cycle where it borrows to repay what it already owes. The high interest rate environment only makes this more expensive,” he added.Similarly, Chief Executive Officer of HighCap Securities, Mr. David Adonri, attributed the development to the large fiscal deficit embedded in the 2026 budget.He said: “The huge deficit in the 2026 budget necessitates borrowing. For the government to overshoot its borrowing limit in Q1 may indicate revenue shortfalls or a deliberate decision to overtrade.”Also commenting, Head of Research at Quest Merchant Bank, Tunde Abidoye, pointed to underperformance in oil revenue.”The most likely factor is persistent revenue underperformance. Oil production averaged around 1.6 million barrels per day, below the budget benchmark of about 1.8mb/d,” he said.On his part, Chief Economist at United Capital Plc, Ayodele Akinwunmi, explained that government borrowing is not always evenly distributed across the year.”For instance, the government may borrow more during the dry season to accelerate road construction projects, while borrowing tends to be lower during the rainy season when construction activities slow down,” he noted.

Inflation, crowding-out risksOn the impact of rising borrowing on the economy, analysts warned of mixed outcomes for individuals and corporates.Adonri noted that “excessive domestic borrowing crowds out capital from the real sector and exacerbates inflation,” adding that rising credit to the government is already driving growth in money supply and destabilising asset markets.Abidoye, however, said the impact depends on how borrowed funds are utilised.”If the funds are well managed, it could have a positive impact on national infrastructure, and productivity. The key negative for Nigerians is a higher debt stock, which translates to a rise in debt service obligations – which ultimately have to be funded by taxpayers,” he said.In the same vein, Akinwunmi emphasised that borrowing is not inherently negative if channelled into productive investments.”Building up the nation’s stock of infrastructure is critical to accelerating economic growth and development. Borrowing, when directed toward well-chosen projects, can generate strong multiplier effects across the economy. Therefore, it is essential to continue encouraging the government to borrow responsibly to finance projects that deliver long-term benefits and stimulate sustainable growth in Nigeria.,” he added.

More borrowing likelyLooking ahead, analysts expressed concerns that the borrowing trend may persist in the near term.Adonri warned that fiscal indiscipline could sustain elevated borrowing levels.”There is already evidence of budget indiscipline. This trend is likely to continue, and the government may be entering a debt trap where new borrowing is required to service existing obligations,” he said.Abidoye also noted that borrowing could exceed projections if revenue performance remains weak.”We take guidance from the budget, but borrowing may overshoot if there are revenue shortfalls in Q2,” he said.However, Akinwunmi expressed a relatively optimistic outlook, citing improving oil prices and tax reforms.”With higher crude oil prices and ongoing tax reforms, government revenue is expected to improve, which should reduce reliance on borrowing,” he stated.Similarly, Ubah warned that the borrowing trend is unlikely to ease in the near term.

The borrowing trend is unlikely to ease in the coming quarters. With a wide fiscal deficit and revenue performance that continues to disappoint, the government has very little room to pull back.”The honest outlook is that total borrowing for the full year will likely exceed what was planned. The domestic bond market will remain the government’s primary financing tool, with issuance volumes staying elevated through Q4,” he said.Fiscal discipline, revenue mobilisation keyOn measures to curb the rising debt profile, analystsunanimously emphasised the need for stronger fiscal discipline and improved revenue generation.Afrinvest analysts called for tighter adherence to fiscal frameworks and greater policy credibility.Adonri advocated a fundamental shift in fiscal management.”The only way FGN can stop this financial recklessness is by rationalisation of the expenditure budget and pursuit of a disciplined balanced budget.

The current budget does not reinforce the strategic imperatives of an economy that needs critical transformation,” he said.Abidoye highlighted the role of tax reforms in boosting revenue.”The implementation of the Tax Act should enhance revenue and reduce borrowing pressures going forward,” he noted.Akinwunmi also stressed the importance of efficient allocation of public funds.”Through disciplined execution of projects and careful allocation of public funds to sectors that directly and indirectly benefit the economy, Nigeria can strengthen its earning capacity. Prioritising investments in infrastructure, productive industries, and social services will not only enhance immediate economic activity but also build long-term resilience and growth potential for the country. Doing this will enable the country generate revenue to repay both the principal loan and interest obligations,” he said.

Business

Stewardship, not seizure: What the Union Bank case is really about

Published

45 minutes ago

May 27, 2026

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Stewardship, not seizure: What the Union Bank case is really about

By Cynthia Alo

There is a particular genre of financial commentary that mistakes legal process for a factual verdict. A court delivers a first-instance ruling, procedural questions are raised, and before the ink is dry on the appeal filing, the narrative has already hardened: the regulator overreached, investor confidence is shattered, and Nigeria’s financial governance is on trial before the world.

Much of the commentary currently circulating about Union Bank of Nigeria belongs to that genre. It is not without merit on certain procedural questions.

But it is, at its core, incomplete — and incompleteness in financial journalism carries costs that run well beyond the column.

The Acquisition That Started Everything

In 2022, Titan Trust Bank Limited, then chaired by Mr Tunde Lemo, acquired approximately 94 per cent of Union Bank of Nigeria through two Dubai-registered entities: Luxis International DMCC, promoted by Mr Rahul Savara, and Mr. Cornelius Vink’s Magna International DMCC, both linked to the Tropical General Investments (TGI) Group.

The US$300 million transaction was financed predominantly through an Afreximbank facility.

The CBN’s policy is unambiguous: borrowed funds may not be used to acquire shares in a licensed financial institution. That principle exists because debt-funded acquisitions hollow out the very capital base they purport to build.

That is precisely what happened. A forensic audit found that the Afreximbank loan was ultimately reflected in Union Bank’s own books, with no hedging arrangements against naira depreciation. As the currency weakened, revaluation losses intensified, the capital adequacy ratio deteriorated into negative territory, non-performing loan exposure increased significantly, and a substantial capital shortfall emerged. Critically, as stated in the Bank’s own Notice of Appeal, a special examination was conducted, and its findings were formally presented to former Managing Director, Mudassir Amray and the board, then chaired by Farouk Gumel, who were confronted with the institution’s grave financial condition and continuing regulatory infractions.

The claim that the CBN acted without evidence before dissolving the board is, on the record, simply not accurate.

The Legal Picture

The CBN acted under Section 34 of BOFIA 2020 and Section 52 of the CBN Act 2007 — broad discretionary executive powers that do not require a special examination as a condition precedent.

The Federal High Court’s characterisation of those powers as quasi-judicial is itself among the central questions now on appeal. Both the CBN and Union Bank have filed formal appeals. Union Bank’s own Notice of Appeal, filed the day after judgment on thirteen grounds and argued by Olaniwun Ajayi LP, challenges the ruling on several fronts: that the respondents may never have had locus standi to sue in the first place, under the rule in Foss v. Harbottle; that the application was filed nearly two years after the January 2024 events, well outside the prescribed three-month limitation window; and that the CBN-supervised recapitalisation exercise, mandated under Section 9 of BOFIA, cannot constitute evidence of bad faith. These are not technicalities.

They are substantive questions of law that the Court of Appeal must now determine.

The Human Stakes and the Real Question

Behind the legal arguments sit approximately 7.8 million depositors and around 6,450 employees across 281 branches. Union Bank’s own affidavit describes it as a systemically important institution in a precarious financial situation, continuing to rely on CBN forbearance for its existence — a frank admission that validates, rather than undermines the case for intervention.

Meanwhile, critics argue the dispute damages investor confidence. The wider evidence does not support that conclusion. By April 2026, thirty-three Nigerian banks had raised N4.65 trillion under the CBN’s recapitalisation framework — over ten times the 2004 to 2005 consolidation figure.

The Nigerian Exchange All-Share Index rose approximately 29 per cent in the first quarter of 2026 alone. The market has read the CBN’s resolve as stability, not recklessness. Conflating this case with a systemic confidence crisis runs the risk of misleading the very international investors the commentary claims to be protecting.

The structural vulnerability at the centre of this dispute originates not with the regulator but with an acquisition financed with borrowed funds, loaded onto the acquired institution’s balance sheet, and left unhedged against exchange-rate risk. When the CBN stepped in, it was doing what central banks everywhere are expected to do.

When Union Bank’s own legally constituted board subsequently filed its own appeal, it was signalling what a properly constituted governance structure recognises as being in the institution’s best interests. Nigeria’s appellate courts — not the court of commentary — are the appropriate arena for resolution.

Union Bank of Nigeria is a 109-year-old institution serving nearly eight million depositors. It is not being dismantled. It is being stabilised under active regulatory supervision, with operations intact and depositors protected. In the language of institutional governance, that is called stewardship.
The commentary that mistakes it for anything else does the institution, its depositors, and Nigeria’s financial governance narrative a disservice that will outlast the headlines.
*Bala Rabiu, writes from Kano.

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Business

Vegetable oil policy in crisis as imports dominate- Producers lament

Published

58 minutes ago

May 27, 2026

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World Heart Day: NHF warns against consumption of unwholesome vegetable oil

•Warns policy failure hurting local oil investors

By Cynthia Alo

Vegetable and edible oil producers have raised alarm over the continued dominance of imported brands despite the retention of items in the Federal Government’s prohibition list under the 2026 fiscal policy measures.

According to the National Chairman of the Vegetable/Edible Oil Producers Association of Nigeria (VEOPAN), Okey Ikoro, the local market is still dominated by more than 100 imported oil brands, warning this threatens investments and discourages backward integration in the sector.

Speaking recently in an interview on Arise TV Ikoro disclosed that members of the association recently intercepted three trailers transporting smuggled vegetable oil through the Badagry axis.

Ikoro, while reviewing the effect of the 2026 fiscal policy measures on the vegetable oil sector of the Nigerian economy, attributed this development to failure of government agencies to enforce the ban on foreign brands of vegetable and edible oil brands. The agencies he said include the Nigeria Customs Service, National Agency for Food and Drug Administration and Control (NAFDAC), and the Standards Organisation of Nigeria,(SON).

According to him, the initial ban failed by 85 percent after two years, even though it initially boosted investments as firms embarked on expansion projects following government protection of the industry.

He said: “The 2023 fiscal policy definitely placed vegetable oil under prohibition and a lot of milestones were gained because it was a long-time policy from 2023 to 2026. A lot of companies went into backward integration, huge companies like Okomu, Presco, PZ Wilmar , all of them went into major expansion because the policy gave protection to the industry.

“But two years later, entering 2024 and 2025, there was a total collapse of implementation on the side of the agencies that were supposed to monitor the fiscal policy, especially in the area of prohibition of items. We noticed that the markets were flooded with imported vegetable oil despite the fact that the item was under prohibition. If you go into the local market, you will see more than 100 brands of vegetable oil coming in from outside the country, in yellow jerry cans with funny labels.

Nobody is monitoring. NAFDAC is not doing its job.

“This resulted in a lot of losses and setbacks to the companies. Companies would have borrowed huge sums of money to put into their backward integration because oil palm is a long gestation investment. Before you can start getting returns, it takes a minimum of five years.

“These implementation problems do not give confidence to investors to even come into the country, or for those of us that are locally investing, to continue to invest in this sector. The government should not only put policies in place; it should also monitor their implementation.

“Just a few days ago, members of the association arrested three long trailers coming in from Badagry, all carrying vegetable oil. NAFDAC came to the spot and saw that these are prohibited items. But our worry is, where is Nigerian Customs on this?

“In all the markets, you see all sorts of brands coming in from all over Nigeria through Badagry and the northern borders, it was like a madhouse, actually, and it was like nobody is in charge of the borders anymore.”

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Business

Banks, insurers, others record 8.5% growth in GDP to N1.93trn

Published

1 hour ago

May 27, 2026

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Breaking: Nigeria’s GDP growth rate slows to 3.8%

By Babajide Komolafe

Financial institutions including banks and insurance firms recorded a 8.5 per cent growth in real Gross Domestic Product, GDP to N1.9 trillion in the first quarter of 2026, Q1’26 from N1.78 trillion in Q1’25.

The National Bureau of Statistics, NBS disclosed this in its GDP report for Q1’26. The report showed that the financial institutions sub-sector remained the dominant driver of activity, contributing N1.75 trillion in Q1 2026, up from N1.61 trillion in the corresponding period of 2025. This reflects an increase of about 8.4%, underscoring sustained expansion in banking operations, credit delivery, and financial intermediation.

The insurance sub-sector also recorded steady growth, rising to N180.95 billion in Q1 2026 from N164.58 billion in Q1 2025, representing an increase of approximately 9.9%. The performance signals gradual improvement in risk underwriting, premium generation, and broader market penetration.

The NBS in its report stated: “The Finance and Insurance Sector consists of the two subsectors, Financial Institutions, and Insurance, in which the former accounted for 90.62% and the latter 9.38% of the sector, respectively in real terms in Q1 2026.

“The sector grew at 46.91% in nominal terms (year-on-year), with the growth rate of Financial Institutions at 46.71% and 48.80% growth rate recorded for Insurance. The overall rate was higher than Q1 2025 by 25.89% points, and higher by 20.33% points than the preceding quarter.

“The quarter-on quarter growth was 18.86%. The sector’s contribution to the nominal GDP was 3.83% in Q1 2026, higher than the 3.07% it represented a year previous, and higher than the contribution of 2.91% it made in the preceding quarter.

“Growth in this sector in real terms totaled 8.54%, lower by 6.49% points from the rate recorded in the 2025 first quarter and higher by 0.24% points from the rate recorded in the preceding quarter.

“Quarter-on-quarter, growth in real terms stood at 17.77%. The contribution of Finance and Insurance to real GDP totalled 3.76%, higher than the contribution of 3.60% recorded in the first quarter of 2025 by 0.16% points, and higher than 2.56% recorded in Q4 2025 by 1.20% points.”

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