Nigeria Frontloads N29.2tn Borrowing As Inflation Risks Bite

Nigeria’s fiscal managers have thrown open the debt taps at a pace not seen in recent memory, moving early and aggressively into the domestic market to raise cash before borrowing costs climb any higher. The strategy, described in the latest Fixed Income Thematic Report by Meristem Securities Limited, points to a government determined to lock in funding while conditions remain, for now, on its side.

The report, issued on Thursday, traces the surge to a sharp revision of the national fiscal plan. According to Meristem, its early forecast anticipated heavier borrowing because of the enlarged budget. “Our expectation at the start of the year was for a material acceleration in government borrowing, driven by the expansion of the 2026 budget to N68.32tn from N58.18tn and the corresponding increase in the borrowing plan to N29.20tn from N11.31tn,” the firm stated.

The 2026 Appropriation Act, signed by President Bola Tinubu in April, remains the largest in the country’s history. Official records place projected revenue at N36.87tn against expenditure of N68.32tn, leaving a fiscal deficit of N31.46tn, with debt servicing alone gulping N15.81tn. That backdrop explains why authorities chose to move quickly. “Given the scale of the fiscal requirement, we anticipated a frontloading of issuance in our 2026 full-year outlook, particularly given supportive liquidity conditions and relatively favourable market access at the beginning of the year,” the report added.

First quarter figures bear this out. In the Treasury bills market, the government sold far more than it needed simply to refinance maturing paper. “Against maturities of N5.51tn, this translated to a net issuance of N2.71tn. For context, net issuance in the corresponding period of 2025 stood at just N348.52bn,” Meristem noted, describing an almost eightfold jump year on year. The firm stressed the shift reflected fresh domestic financing “rather than a simple rollover of maturing obligations.”

The bond segment told a similar story. Cumulative first quarter issuance reached N2.45tn, exceeding maturities and coupon payments of N2.13tn to deliver net issuance of N351.39bn.

Rather than easing off, the government is scaling up. Revised calendars show the final two Treasury bill auctions for June raised from N700bn to N1.00tn and from N450bn to N1.00tn. The sovereign bond market, meanwhile, is bracing for what the report called “the largest on record at N1.20tn across the two bond reopenings.”

Meristem framed the drive as a defensive play. “Taken together, developments across both the Treasury bills and bond segments point to a clear policy objective: secure funding early in the year and reduce the risk of having to access the market more aggressively later, particularly in an environment where inflation and borrowing costs remain highly uncertain,” the report said.

Those uncertainties are real. Headline inflation rose to 15.93 per cent in May 2026, its third straight monthly increase, though well below the 26.06 per cent recorded a year earlier, according to the National Bureau of Statistics. The Central Bank retained its Monetary Policy Rate at 26.5 per cent at its May meeting, after a modest cut in February. With total public debt standing near N159.28tn as at December 2025, the pressure on fiscal space is considerable.

For investors, the calculation is straightforward. Higher yields are being demanded to guard portfolios against sticky inflation, and Meristem expects that tension between debt management and market returns to shape both the fixed income and equity landscapes through the rest of 2026.