The Federal Government expects Nigeria’s 2026 fiscal deficit to fall below its budget target of 4.2 per cent of Gross Domestic Product, as improved revenue and declining borrowing costs ease pressure on public finances.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, disclosed this in an interview in London according to a Bloomberg report on Thursday.
Oyedele said the government planned to review its fiscal projections and announce a revised deficit target, expressing confidence that the shortfall would be lower than initially anticipated.
“We think it will be narrower than the 4.2 per cent,” he said. “The priority is the cost of debt relative to revenue and that already is moving in the right direction.”
The projection suggests a possible improvement in the Federal Government’s fiscal position, following efforts to increase revenue and reduce the cost of servicing public debt.
Nigeria had set a deficit target of 4.2 per cent of GDP for 2026 in December. A fiscal deficit occurs when government expenditure exceeds its revenue, requiring it to borrow to finance the shortfall.
Oyedele said the government did not expect the deficit to exceed the budget target, adding that the review would reflect recent developments in revenue collection and borrowing costs.
“We don’t think it will be worse than the target; we think it will be better,” he said.
However, the Federal Government’s more optimistic outlook differs from the World Bank’s assessment of Nigeria’s broader public finances.
The bank expects the country’s consolidated budget deficit, which includes the federal, state and local governments, to widen this year. It attributed the projected deterioration to increased capital spending by state governments and rising federal expenditure on personnel, interest payments and pre-election activities, despite improved revenue.
The divergence highlights the difference between the Federal Government’s fiscal outlook and the finances of the wider public sector.
Oyedele also pushed back on concerns about Nigeria’s debt-servicing burden after World Bank data showed that interest payments in the first half of 2026 exceeded Federal Government revenue by 24 per cent.
The finance minister argued that the comparison did not capture the full picture because the interest payments included obligations serviced on behalf of other tiers of government, while the revenue figure excluded some receipts.
Speaking separately at a Chatham House event, he said some government revenue had not been included in the figures used to assess the debt burden.
“We have some of our revenues that haven’t been captured,” Oyedele said, adding that higher revenue and moderating interest costs would help reduce the fiscal deficit relative to the size of the economy.
Nigeria’s public debt has continued to rise. Data on the Debt Management Office’s website showed that total public debt, comprising domestic and external obligations, increased by 21 per cent to $121bn in June 2026 from a year earlier.
Meanwhile, monetary policy developments have begun to ease borrowing costs. The Central Bank of Nigeria cut its benchmark interest rate by 350 basis points to 23 per cent in September, after which yields on short-term government securities fell to their lowest levels of the year before rising again in October.