Nigeria’s debt servicing costs exceeded capital expenditure by N3.9tn between 2024 and 2025, underscoring mounting fiscal pressure on the Federal Government’s finances, according to a media brief from the Federal Ministry of Finance.
The document also showed that the Federal Government spent N27.2tn on servicing public debt during the two-year period.
The brief, prepared by the Special Adviser to the Minister of Finance and Coordinating Minister of the Economy on Media and Communications, Dr Ogho Okiti, attributed the rising debt servicing costs largely to macroeconomic factors such as the depreciation of the naira and higher domestic interest rates.
Data in the document indicated that the government spent N12.63tn on debt servicing in 2024, significantly above the N8.56tn budgeted for the year. In 2025, the figure rose further to N14.57tn, exceeding the N13.12tn initially provided in the budget.
Overall, debt servicing exceeded budget projections by about N5.52tn across the two years. A year-on-year comparison showed that the cost increased by N1.94tn, representing a 15.4 per cent rise between 2024 and 2025.
According to the ministry, the increase was driven mainly by exchange rate movements rather than new borrowing.
“External debt is denominated in foreign currency. When the naira depreciates, the naira cost of servicing the same dollar debt rises automatically. This is a valuation effect and not evidence of new borrowing,” the document stated.
The brief also linked the increase to higher domestic interest rates following tighter monetary policy by the Central Bank of Nigeria aimed at stabilising inflation and the exchange rate.
The document further showed that debt servicing absorbed a significant portion of government revenue. Federal revenue increased from N12.48tn in 2023 to N20.98tn in 2024, reflecting improved tax administration and stronger non-oil revenue.
However, with debt service payments reaching N12.63tn in 2024, about 60 per cent of government revenue was used to meet debt obligations that year.
By November 2025, government revenue stood at N22tn, while debt servicing had risen to N14.57tn, meaning nearly two-thirds of revenue went into servicing debt.
Despite the rising debt burden, the government maintained substantial capital spending. Capital expenditure stood at N11.59tn in 2024, while N11.7tn had been spent on capital projects as of November 2025.
The data showed that debt servicing exceeded capital spending by N1.04tn in 2024 and by N2.87tn in 2025, bringing the total gap over the two-year period to N3.91tn.
The ministry said perceptions that capital projects were not being implemented were inaccurate, explaining that federal capital spending includes both direct budget releases to ministries, departments and agencies and project-tied loans from development partners.
It noted that multilateral and project-tied loans are disbursed directly by development partners for specific infrastructure and social projects, allowing projects to continue even when cash releases to MDAs are limited.
The brief also highlighted fiscal reforms introduced since 2023, including the decision by the administration of Bola Tinubu to halt what it described as excessive use of Ways and Means advances from the Central Bank of Nigeria.
According to the ministry, the overdrafts had accumulated to about N30tn and were previously not transparently reflected in the fiscal deficit framework. The advances have now been securitised and formally recognised within the public debt structure.
It added that fiscal deficits are now financed through structured borrowing instruments subject to legislative oversight rather than direct monetary financing.
The ministry also explained that a large portion of the increase in Nigeria’s public debt stock reflects accounting adjustments and exchange rate movements rather than new borrowing.
It noted that about N30tn in Ways and Means advances has now been formally incorporated into the public debt framework, while about N70tn of the increase in nominal public debt is linked to exchange rate valuation effects.
The document further highlighted the impact of oil revenue shortfalls on government finances. In 2025, projected oil and gas federation revenue was N37.4tn, but actual inflows were only about N7tn, representing 19 per cent performance.
According to the ministry, if the projections had been realised, the Federal Government could have earned about N15tn more in revenue.
Commenting on Nigeria’s debt burden, the Programme Manager of the Sustainable Nigeria Programme at Heinrich Böll Stiftung, Ikenna Ofoegbu, warned that rising borrowing costs were consuming government revenue.
“Our debt servicing is about 60 to 70 per cent. It has come down from about 80 to 90 per cent, but revenue is still being swallowed by debt payments,” he said.
The Executive Director of the Centre for Inclusive Social Development, Folahan Johnson, said the social consequences of rising debt should not be ignored.
“The true cost of debts is the out-of-school child, the out-of-school girl. It is also the woman who loses her life because of lack of access to basic maternal healthcare,” he said.
In its economic outlook for 2026, the Centre for the Promotion of Private Enterprise warned that the projected N15tn debt service bill in the 2026 budget could further constrain fiscal space.
Its Chief Executive Officer, Muda Yusuf, said high debt servicing costs would limit the government’s ability to fund growth-enhancing projects.
Similarly, analysts at Meristem Securities projected that Nigeria’s public debt could rise further due to increased domestic borrowing and external commitments tied to the N23.85tn deficit in the 2026 budget.
