Nigeria spends N7.7trn on debt interest, exceeding revenue by N1.5trn

The Federal Government spent N7.7trn on debt interest payments in the first half of 2026, exceeding its total revenue of N6.2trn by N1.5trn, the World Bank has reported.

The figures mean interest payments alone consumed 124.2 per cent of federal revenue between January and June, leaving the government with limited resources to fund infrastructure and other public services.

The findings are contained in the World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities.

According to the report, interest payments rose by N2.1trn, or 37.5 per cent, from N5.6trn recorded in the corresponding period of 2025, largely due to high domestic borrowing costs.

“Interest payments increased to 3.1 per cent of GDP (N7.7trn) from 2.5 per cent (N5.6trn) amid high domestic borrowing costs,” the World Bank stated.

Although the interest-to-revenue ratio improved from approximately 155.6 per cent in the first half of 2025 to 124.2 per cent in the same period of 2026, interest obligations continued to exceed the government’s earnings.

Federal revenue increased by N2.6trn, or 72.2 per cent, from N3.6trn in the first half of 2025 to N6.2trn in the corresponding period of 2026.

The World Bank attributed the growth to improved oil receipts, stronger corporate tax collections and higher independent revenues, while customs revenue remained stable and Value Added Tax collections recorded comparatively little growth.

Despite the revenue increase, total federal expenditure rose by 10.3 per cent, from N14.6trn to N16.1trn during the period.

Personnel costs also increased from N3.7trn to N4.2trn following wage adjustments, further tightening the government’s fiscal position.

Meanwhile, reported capital expenditure fell sharply from one per cent of Gross Domestic Product in the first half of 2025 to 0.3 per cent in the corresponding period of 2026, equivalent to N700bn.

The figures indicate that the Federal Government spent approximately 11 times more on interest payments than on reported capital projects during the six-month period.

Combined interest and personnel costs reached N11.9trn, accounting for about 73.9 per cent of total federal expenditure and nearly twice the government’s revenue.

Despite the pressure from recurrent obligations, the Federal Government’s fiscal deficit narrowed from N11trn, equivalent to five per cent of GDP, in the first half of 2025 to N9.9trn, or four per cent of GDP, in the corresponding period of 2026.

However, the World Bank cautioned that the improvement should be treated carefully because of the low level of reported capital spending.

“The improved early-year fiscal outturn should be interpreted cautiously given the low reported federal capital spending,” the report stated.

It added that personnel and interest costs continued to absorb a significant share of available resources, warning that increased capital spending later in the year, alongside recurrent and pre-election expenditure, could intensify fiscal pressures.

The report also identified overlapping budget cycles, weak expenditure planning and poor alignment between approved budget allocations and implementation capacity as persistent weaknesses in public financial management.

On Nigeria’s broader debt position, the World Bank estimated the country’s debt stock at approximately N177trn in 2025, representing 40 per cent of GDP, compared with N67trn, or 27.6 per cent of GDP, in 2021.

It attributed much of the increase to exchange-rate valuation effects and the recognition of previously accumulated liabilities, including securitised Ways and Means advances.

Domestic debt accounted for 57.9 per cent of Nigeria’s total debt stock but generated 72.6 per cent of interest payments in 2025, reflecting the relatively high cost of borrowing from the domestic market.

To ease the burden, the World Bank recommended limiting expensive borrowing, prioritising concessional financing and extending debt maturities to reduce refinancing risks.

The institution also projected that Nigeria’s consolidated fiscal deficit would widen from 3.1 per cent of GDP in 2025 to 3.5 per cent in 2026, partly due to rising federal interest payments, personnel costs and pre-election spending.

It urged the government to strengthen revenue mobilisation, improve budget credibility and maintain fiscal discipline to prevent debt-servicing obligations from further restricting spending on development projects and essential public services.