FG saves N3.56trn as borrowing surges

The Federal Government and other tiers of government saved N3.56trn from Federation Account revenue between January and September 2026, even as the Federal Government increased its borrowing target to N29.20trn to finance a widening budget deficit.

The savings, which rose by 95 per cent from N1.83trn recorded in the corresponding period of 2025, have raised questions about the government’s fiscal priorities amid mounting public debt and rising debt-servicing obligations.

A report by Agora Policy, titled Ten Insights from FAAC Disbursements for January-September 2026, showed that savings and interventions accounted for N8.34trn of deductions from Federation Account revenue during the nine-month period.

Interventions accounted for N4.78trn, while savings stood at N3.56trn, making the two categories responsible for 75.1 per cent of total deductions, compared with 39.9 per cent in the corresponding period of 2025.

The report noted that refunds amounted to N1.21trn, collection costs stood at N1.09trn, while transfers accounted for N469.06bn.

“Interventions accounted for the largest deduction, at N4.78trn, followed by savings at N3.56tn. In nine months, refunds amounted to N1.21trn and collection costs to N1.09trn. Transfers, at N469.06bn, were the smallest category,” the report stated.

The increase in savings came as the Federal Government expanded its 2026 borrowing target by N11.31trn to N29.20trn from the initial N17.89trn projection.

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The 2026 budget provides for total expenditure of N68.32trn against projected revenue of N36.87trn, leaving a deficit of N31.46trn to be financed largely through borrowing.

Despite the growing borrowing requirement, the Agora Policy report showed that total deductions from Federation Account revenue declined by 3.5 per cent from N11.50trn in the first nine months of 2025 to N11.10trn in the same period of 2026.

The deductions also fell as a proportion of gross revenue, from 41.1 per cent to 35.3 per cent, contributing to an increase in distributable revenue before augmentation.

Gross Federation Account revenue rose by 12.6 per cent from N27.95trn to N31.46trn during the period, while distributable revenue increased by 23.8 per cent to N20.36trn.

According to the report, the N3.91tn increase in distributable revenue exceeded the N3.51trn growth in gross receipts because deductions declined by approximately N400bn.

It noted that the reduction in overall deductions masked a major shift in their composition, with refunds dropping sharply while savings and interventions increased.

“Refunds fell by approximately N3.99trn, moving from the largest deduction category to the third-largest.

“Meanwhile, interventions and savings increased by approximately N3.75trn, from N4.59trn to N8.34trn. Together, interventions and savings accounted for 75.1 per cent of deductions in nine months in 2026, compared with 39.9 per cent in the corresponding period in 2025,” the report stated.

A further breakdown showed that refunds declined by 77 per cent from N5.20trn in the first nine months of 2025 to N1.21trn in 2026.

Collection costs increased by four per cent to N1.09trn, while transfers fell by 29 per cent to N469.06bn.

The report’s findings highlight the tension between the resources being set aside from Federation Account revenue and the Federal Government’s continued reliance on borrowing to meet its expenditure obligations.

However, the N3.56trn savings should not be interpreted as funds retained exclusively by the Federal Government, as Federation Account revenue is shared among the federal, state and local governments under existing allocation arrangements.

The Federal Government has defended its borrowing strategy, arguing that expenditure pressures have outpaced available non-borrowed revenue and that loans are required to finance infrastructure and other development priorities.

The government has also cited rising personnel costs, debt servicing, electricity support and infrastructure commitments as major pressures on public finances.

The Presidency has maintained that borrowing is being channelled towards productive assets rather than short-term consumption, while acknowledging the strain of debt servicing, which stood at about 65 per cent of revenue in the first half of 2026.