.Projects N184.9tn public debt
.Says debt distress risk remains moderate
Nume Ekeghe
A report by CardinalStone has projected that Nigeria’s fiscal deficit will widen to N25.7 trillion, representing 4.9 per cent of Gross Domestic Product (GDP), by the end of 2026, as elevated government spending continues to outpace revenue growth despite ongoing fiscal reforms, Research has said.
The investment firm’s 2026 Mid-Year Outlook, titled, “Steady Hands-on Shifting Grounds,” noted that although fiscal reforms have significantly strengthened government revenues, expenditure remains substantially higher.
The report stated: “Given limited oil windfall gains and elevated government expenditure of N63.0 trillion, we estimate that the fiscal deficit will likely be N25.7 trillion, 4.9 per cent of GDP by the end of the year.”
According to CardinalStone, the federal government has already financed part of the deficit through domestic borrowing.
It said: “To finance the deficit, the government has so far net-borrowed about N8.6 trillion from the local market through bonds and NTBs. Additionally, the government has, in recent times, gravitated towards external debt financing, both budgetary and non-budgetary.”
The report listed the government’s external funding sources to include the proposed $5 billion Total Return Swap (TRS) programme from First Abu Dhabi Bank, a $1 billion UK Export Finance facility, a $1.3 billion World Bank loan and a $516 million syndicated loan for the Sokoto-Badagry Superhighway.
Despite the increased borrowing, CardinalStone maintained that Nigeria’s debt profile remains sustainable.
It projected that total public debt would rise to N184.9 trillion, equivalent to 35.5 per cent of GDP, this year, lower than 36.9 per cent of GDP recorded in 2025.
According to the report, “By our estimate, Nigeria’s debt will reach N184.9 trillion, or 35.5 per cent of GDP, in 2026, lower than in 2025 (36.9% of GDP), supported by Naira gain and faster nominal GDP growth.”
It added that the country’s debt outlook remains favourable, saying: “By the IMF’s assessment, the overall risk of sovereign distress is moderate, supported by a low debt-to-GDP ratio, the long maturity structure of Nigeria’s debt stock, and improvements in macroeconomic conditions.”
CardinalStone also highlighted significant improvements in government revenue since the implementation of fiscal reforms in 2023.
It stated, “Revenue mobilisation has improved since the reforms were introduced in 2023, with monthly gross FAAC earnings now averaging N2.2 trillion (vs N0.9 trillion pre-reform), supported by gains from the recent surge in oil prices and stronger non-oil earnings.”
The report noted that stronger tax collections and reforms in the oil sector have also strengthened government finances. It cited Bloomberg data showing Nigeria generated N15.8 trillion in tax revenue in the first five months of the year on an annualised basis, while an executive order signed in April eliminated several deductions previously retained by the Nigerian National Petroleum Company Limited (NNPC), allowing more oil revenue to flow into the Federation Account.
However, CardinalStone cautioned that Nigeria should not expect a substantial oil windfall despite the surge in crude prices witnessed during the Middle East conflict.
According to the report, “Even though oil prices were well above the budget target of $64.85/bbl, we estimated the potential oil windfall gain between March and May at N256.0 billion or N85.3 billion per month, reflecting weaker-than-budgeted oil production of 1.60 mb/d (vs the target of 1.84 mb/d).”
It added, “Had production met the budget target, the estimated windfall gain could have scaled to N2.0 trillion.”
The report also noted that higher revenues have improved the fiscal position of state governments adding, “Aggregate state revenues increased to N15.4 trillion in 2025 from N12.1 trillion a year earlier, while internally generated revenue rose by 47 per cent, enabling states to increase capital spending and reduce their debt burden.”
