NEWS
Nigeria Spends ₦7.7tn on Debt Interest in Six Months as Payments Exceed Federal Revenue by ₦1.5tn, According to World Bank
The Federal Government of Nigeria spent a staggering ₦7.7tn on interest payments between January and June 2026, an amount that exceeded its total revenue of ₦6.2tn by ₦1.5tn, according to the World Bank, highlighting the growing pressure of debt servicing on the country’s public finances.
The figures, contained in the World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities, raise fresh concerns about Nigeria’s ability to finance infrastructure, public services and other critical development priorities while meeting its mounting debt obligations. The report revealed that interest payments increased by ₦2.1tn, representing a 37.5 per cent rise from the ₦5.6tn recorded during the corresponding period of 2025. The increase was attributed largely to high domestic borrowing costs. Interest payments rose from 2.5 per cent of Gross Domestic Product in the first half of 2025 to 3.1 per cent in the corresponding period of 2026, underscoring the growing weight of debt servicing on the nation’s economy.
Although the Federal Government recorded a significant increase in revenue during the period, the improvement was insufficient to cover its interest obligations. Federal revenue rose by ₦2.6tn, or 72.2 per cent, from ₦3.6tn in the first half of 2025 to ₦6.2tn between January and June 2026.
The World Bank attributed the revenue growth to a recovery in oil receipts, stronger corporate tax collections and higher independent revenues. Customs revenue remained relatively stable, while value-added tax collections recorded comparatively little improvement.
An analysis of the figures showed that the ratio of interest payments to federal revenue improved from approximately 155.6 per cent in the first half of 2025 to 124.2 per cent in the corresponding period of 2026. Despite this improvement of 31.4 percentage points, the Federal Government continued to spend more on servicing its debt than it generated in revenue, leaving substantial pressure on its finances.
The situation was further compounded by an increase in overall government expenditure, which climbed from ₦14.6tn in the first half of 2025 to ₦16.1tn during the same period in 2026. The ₦1.5tn increase represented a 10.3 per cent rise in federal spending. Personnel costs also increased following wage adjustments, rising from ₦3.7tn to ₦4.2tn within the six-month period.
However, one of the most striking findings in the report was the sharp decline in reported capital expenditure, which fell from one per cent of GDP in the first half of 2025 to just 0.3 per cent in the corresponding period of 2026, equivalent to approximately ₦700bn. The figures indicate that interest payments alone were about 11 times the amount spent on reported capital projects during the period, raising questions about the resources available for roads, schools, hospitals and other public infrastructure. Combined interest and personnel expenditure reached ₦11.9tn, accounting for approximately 73.9 per cent of total federal expenditure and almost twice the government’s revenue. The development illustrates the extent to which recurrent financial obligations continue to consume public resources that could otherwise support economic growth, infrastructure expansion and social development. Despite the mounting expenditure pressures, Nigeria recorded an improvement in its fiscal balance during the first half of 2026.
According to the World Bank, the Federal Government’s fiscal deficit narrowed from ₦11tn, equivalent to five per cent of GDP, in the first half of 2025 to ₦9.9tn, or four per cent of GDP, during the corresponding period of 2026.
However, the improvement was accompanied by subdued capital expenditure, suggesting that the reduction in the deficit did not necessarily reflect a fundamental easing of the government’s recurrent spending burden. The World Bank cautioned that the fiscal performance should be assessed carefully because of the low level of reported capital spending. The institution also warned that personnel and interest costs continued to absorb a substantial share of available fiscal resources, while increased capital project implementation later in the year, alongside recurrent and pre-election spending, could place additional pressure on government finances.
Beyond the immediate budgetary challenges, the World Bank identified overlapping budget cycles, weak expenditure planning and poor alignment between approved budget allocations and implementation capacity as persistent weaknesses in Nigeria’s fiscal management.
The report further estimated that Nigeria’s public debt stock stood at approximately ₦177tn in 2025, equivalent to 40 per cent of GDP, compared with ₦67tn, or 27.6 per cent of GDP, in 2021. The increase reflected several factors, including exchange-rate valuation effects and the recognition of previously accumulated liabilities, particularly securitised Ways and Means advances.
The composition of the country’s debt also presents a significant challenge. Domestic borrowing 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 within the domestic market.
The World Bank recommended that the Federal Government limit expensive borrowing, prioritise concessional financing and extend debt maturities to reduce refinancing risks and ease the pressure of debt servicing on annual budgets.
The institution also projected that Nigeria’s consolidated fiscal deficit could widen from 3.1 per cent of GDP in 2025 to 3.5 per cent in 2026, partly because of rising federal interest payments, personnel costs and pre-election spending.
It stressed the need for stronger revenue mobilisation, improved budget credibility and sustained fiscal discipline to prevent debt obligations from further undermining development expenditure.
The latest figures place Nigeria’s fiscal management under renewed scrutiny, particularly as the government seeks to increase revenue, manage its public debt and deliver infrastructure and essential services amid competing expenditure demands.
With interest payments already exceeding total federal revenue during the first half of 2026, the central challenge remains how to reduce the cost of borrowing, improve the efficiency of public spending and ensure that a greater share of government resources translates into tangible economic and social benefits for Nigerians.