Nigeria's budget shortfall surpasses statutory threshold

Nigeria's fiscal deficit, as outlined in the 2026 Appropriation Act, has surpassed the maximum limit set by the Fiscal Responsibility Act, a new report by BudgIT has revealed.

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The report, titled Federal Government Approved Budget Analysis 2026, highlights that the approved budget anticipates revenue of N36.87tn, while total expenditure is projected to be N68.32tn, resulting in a financing gap of N31.45tn, which is equivalent to 6.41 per cent of the country's Gross Domestic Product.

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According to the report, the projected deficit exceeds the three per cent ceiling stipulated under the Fiscal Responsibility Act by more than double, raising concerns about the sustainability of Nigeria's public finances.

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The report also criticises key assumptions underlying the 2026 budget, warning that overly ambitious revenue projections could exacerbate the country's debt burden if they are not realised.

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It notes that the government is expected to finance only about 53.9 per cent of the proposed expenditure from projected revenues, with the remaining balance to be financed largely through borrowing.

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BudgIT has expressed doubts about the credibility of the Federal Government's revenue projections, citing that successive administrations have consistently failed to meet annual revenue targets.

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As of mid-2025, only N10.92tn had been generated, compared to a revenue target of N36.35tn, suggesting that similar assumptions for 2026 may be difficult to achieve.

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The organisation has also voiced concern over rising poverty, with millions of Nigerians facing worsening living conditions despite recent macroeconomic reforms.

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Official statistics cited in the report show that the number of Nigerians living in poverty increased from 40 million in 2019 to 56 million in 2023, with rural communities being disproportionately affected.

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BudgIT has urged the Federal Government to prioritise investments that stimulate economic productivity, improve social protection programmes, and create a more enabling environment for small and medium-scale enterprises.

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The report criticises the funding allocated to critical sectors, stating that allocations to health and education are significantly below international commitments.

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According to BudgIT, the health sector received only about five per cent of the national budget, far below the 15 per cent Abuja Declaration target, while education accounts for approximately four per cent of total spending.

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Chronic underinvestment has continued to undermine healthcare delivery, worsen infrastructure deficits in schools, and limit the country's human capital development prospects, the report warns.

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The report acknowledges improvements in Nigeria's macroeconomic indicators, including the increase in foreign exchange reserves to $45.5bn by the end of 2025.

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However, it cautions that these gains are driven largely by short-term portfolio investments rather than long-term productive capital capable of sustaining economic growth.