The Federal Government increased its domestic borrowing by 90.5 per cent to N24.7 trillion in the eight months to August 2026, crowding private businesses out of bank vaults across the country. The state borrowed just N12.98 trillion over the same stretch in 2025. President Bola Tinubu’s finance managers have already burned through 84.7 per cent of the entire domestic borrowing target for the year. That leaves barely N4.5 trillion on the books for the remaining four months of 2026. The state borrows an average of N3.08 trillion every single month. At this pace, the administration will blow past its legal debt ceiling before December arrives. Public spending grows far faster than the country can realistically afford. The sovereign debt appetite now drains vital cash from the real economy.
The government runs this borrowing spree despite taking in record revenues from taxes and mineral receipts. Revenue collectors at the customs service, the tax agency, and the state oil firm report record cash receipts this year. The treasury also pocketed substantial windfalls from currency devaluation and the removal of petrol subsidies. Yet these massive revenue gains vanished almost instantly into recurrent state spending. Tunde Abidoye of Quest Merchant Bank noted that public expenditure still outpaces revenue growth by fourfold. Higher revenue merely whets the civil service appetite for bigger budgets. Official promises of fiscal discipline ring hollow in the face of runaway debt numbers. The state collects more taxes only to spend even more borrowed money.
To finance this appetite, the Debt Management Office flooded local trading desks with fresh paper. Treasury officials leaned heavily on long-term federal bonds, savings bonds, and short-term treasury bills to sweep up liquidity. Banks and pension fund managers rushed to buy these sovereign papers because they offer fat, risk-free yields. Institutional investors parked trillions of naira in government debt rather than backing private factory floors. Ayodeji Ebo of MDU Capital warned that this sovereign hoarding suffocates commercial credit across the nation. Lenders have little reason to trust small businesses when the state pays handsome returns on zero-risk debt. Commercial credit now flows toward government offices while private enterprise starves. Risk-free sovereign debt makes ordinary commercial lending look foolish to bankers.
The consequence for domestic commerce is both immediate and punishing. Commercial banks now demand interest rates above 35 per cent from private corporate borrowers. Few productive firms can earn enough profit to pay such punishing financing costs. Factory owners delay new machinery orders, freeze hiring plans, and scale down factory shifts. Nnamdi Nwizu of Comercio Partners pointed out that safe returns on state bonds remove any bank incentive to support industry. Small enterprises and retail merchants bear the heaviest burden of this credit squeeze. Entrepreneurs find bank doors firmly shut unless they pledge ruinous collateral. High interest rates crush private enterprise while civil servants balance bureaucratic ledgers.
The budget math behind this borrowing frenzy exposes deep structural flaws in public accounting. Under the 2026 budget, the federal government plans to spend N68.32 trillion against expected revenues of N36.87 trillion. That leaves an eye-watering fiscal hole of N31.45 trillion for fiscal managers to fill. Finance officials allocated N29.20 trillion of that deficit to domestic and foreign borrowing. External lenders have largely closed their chequebooks due to high global borrowing rates and regional risks. The government therefore turned its full fiscal weight onto the shallow domestic capital market. Relying on local vaults to finance structural state waste ruins private investment. The federal deficit swallows the very savings that should fund industrial growth.
Mounting debt obligations also threaten to eat up future capital investments in roads, schools, and hospitals. Debt service charges now consume the lion’s share of federally retained revenue each month. When interest payments swallow public earnings, vital infrastructure projects grind to an abrupt halt. Ayodele Akinwunmi of United Capital argued that citizens must judge this borrowing by the quality of assets it builds. Yet much of this borrowed cash flows into bloated salaries and luxury administrative perks. Road contractors wait months for payment while bondholders collect their coupons on time. Borrowing money to pay civil service allowances creates no lasting national wealth. The country piles up debt while its physical roads and clinics fall apart.
The Central Bank of Nigeria worsens this domestic credit trap with its tight monetary stance. Cardoso keeps the benchmark policy rate pinned at 26.50 per cent to defend the external exchange rate. The apex bank drained trillions in cash from banking reserves last week alone to stop currency speculation. That cash drain pushed the interbank overnight rate above 22 per cent, tightening the credit screws further. Fiscal expansion and monetary tightening now pull the national economy in opposite directions. The finance ministry pumps out debt while the central bank frantically soaks up cash. Private employers sit trapped between a spendthrift treasury and a hawkish central bank. Uncoordinated economic policies make commercial planning nearly impossible for domestic firms.
Federal authorities must rein in their runaway appetite for domestic credit before real industry collapses completely. Ministers must cut wasteful overhead costs rather than treating local bank deposits as an open trough. The National Assembly must enforce statutory borrowing limits instead of rubber-stamping supplementary loan requests. Debt managers should tie every new bond issue directly to revenue-generating capital projects. Commercial banks must face regulatory pressure to channel a fair share of deposits into productive manufacturing. A nation cannot tax and borrow its way into industrial strength. Real growth requires factories that build goods, not treasury desks that churn out paper promises. Unless Abuja curbs its borrowing addiction, private enterprise will wither under the weight of state debt.