Nigeria’s 2026 budget: Between revenue ambition and fiscal reality

Jul 27, 2026 By Economy Post

President Tinubu’s N58.18trn spending plan hinges on N34.33trn in revenue. But with a track record of missing targets by nearly 19 percent and debt servicing consuming 72 percent of external payments, Nigeria’s fiscal credibility faces a defining test.

By Kingsley Eiguedo Okoeguale

When President Bola Tinubu presented the 2026 Appropriation Bill to the National Assembly on December 19, 2025, he described it as a ‘Budget of Consolidation, Renewed Resilience and Shared Prosperity.’ With a proposed outlay of N58.18 trillion and an expected revenue of N34.33 trillion, the fiscal strategy implies a deficit of N23.85 trillion – approximately 4.28 percent of GDP.

At face value, these figures suggest a gradual return to fiscal orthodoxy. However, beneath this glossy surface lies a structural trap. The 2026 budget assumes the Federal Government can generate revenue it has historically failed to collect. It assumes oil production levels it has rarely met. And it assumes an economic resilience that, while improving, remains fragile. For this budget to be more than a mere wish list, Nigeria must confront a harsh reality: Revenue optimism, unsupported by structural change, does not close fiscal gaps – it widens them.

The arithmetic of underperformance

The scale of the revenue challenge is not speculative; it is historical. In the 2024 fiscal year, the Federal Government generated approximately N20.98 trillion in total revenue. While this represented a significant 68.11 percent increase compared to 2023, it still fell short of the annual budget estimate by a substantial N4.89 trillion – an 18.9 percent deviation. This pattern had persisted into 2025. According to the president’s own budget speech, actual revenue as of the third quarter of 2025 stood at N18.6 trillion, representing only 61 percent of the government’s target for that period . When revenue consistently misses the mark by such margins, the budget ceases to be a planning tool and becomes a source of fiscal instability. Every shortfall translates directly into higher domestic borrowing, crowding out private sector credit and elevating sovereign risk.

The debt trap

Nigeria’s growing debt profile now presents an existential threat to fiscal flexibility. By September 2025, total public debt had risen to approximately N153.29 trillion, driven by a combination of domestic and external obligations. While the debt-to-GDP ratio – hovering around 52.9 percent – remains moderate by global standards, the more critical metric is the revenue-to-debt service ratio. On this front, the numbers are alarming.

The 2026 budget allocates N15.52 trillion solely to debt servicing. This figure dwarfs the combined allocation for education (N3.52 trillion) and health (N2.48 trillion). Worse still, data from the Central Bank of Nigeria (CBN) reveals that in 2025, Nigeria spent $5.21 billion servicing external debt, accounting for over 72 percent of total international payments. This means that for every dollar leaving the country, seventy-two cents went to creditors, leaving little room for vital imports or capital investment.

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The oil question

Central to the 2026 fiscal strategy is an oil production benchmark of 1.84 million barrels per day (bpd) and a price assumption of $64.85 per barrel . Historically, these production targets have proven elusive due to theft, pipeline vandalism, and underinvestment in maintenance. While current geopolitical tensions have pushed global crude prices above $100 in early 2026, presenting a potential windfall, Nigeria has a poor record of capitalising on such booms.

Furthermore, the non-oil sector, which accounts for over 97 percent of GDP, remains grossly under-tapped. Despite the passage of new tax acts and reforms aimed at expanding the tax net, the effective tax-to-GDP ratio in Nigeria remains one of the lowest globally. The government cannot tax its way to prosperity without first formalising the economy and plugging collection leakages.

Path to credibility:

For the 2026 budget to avoid the fate of its previous budgets, the fiscal authorities must pivot from optimistic projection to conservative planning.

First, revise the benchmarks. Assuming oil production of 1.84 million bpd is setting the stage for failure. A realistic baseline of 1.5 million bpd – factoring in operational disruptions -swould force discipline in spending.

Second, digitise revenue collection. President Tinubu’s directive to deploy end-to-end digitisation for Government Owned Enterprises (GOEs) is welcome, but execution is key. Leakages in customs and tax administration must be sealed with technology, not rhetoric .

Third is the expenditure rationalisation. With recurrent costs (excluding debt) projected at N15.25 trillion, the government must aggressively cut the cost of governance. Efficiency gains here free up capital for the N26.08 trillion capital expenditure component, which is the only portion of the budget that drives long-term growth.

Conclusion

Nigeria stands at a critical fiscal inflection point. The reforms of the last two years have stabilised the macroeconomic environment, with GDP growing at approximately 4.1 percent and inflation moderating . However, a stable economy cannot survive a leaky fiscal ship.

The 2026 budget presents an opportunity to reinforce credibility. But this opportunity will be squandered if revenue projections remain detached from empirical reality. As President Tinubu rightly noted, “The greatest budget is not the one we announce, but the one we deliver.” Delivery requires truth-telling. The truth is that Nigeria cannot budget its way to prosperity on the back of wishful thinking.

* Kingsley Eiguedo Okoeguale is a fellow of the Institute of Chartered Accountants of Nigeria (ICAN), public policy analyst, and financial expert specializing in corporate governance, regulatory frameworks, and economic policy.