Nigeria’s fiscal pressures have intensified after the Federal Government spent about N3.9tn more on servicing debt than on capital projects between 2024 and 2025, according to a media brief from the Federal Ministry of Finance.
The document revealed that the government spent a total of N27.2tn on debt servicing within the two-year period, reflecting the growing burden of public debt on the country’s finances.
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 sharp rise in debt servicing costs mainly to macroeconomic factors such as the depreciation of the naira and higher domestic interest rates.
According to the report, the Federal Government spent N12.63tn on debt servicing in 2024, significantly higher than the N8.56tn allocated for the purpose in that year’s budget.
Debt servicing rose further in 2025, reaching N14.57tn compared with the N13.12tn initially budgeted for the year. In total, the government spent about N27.2tn servicing debt between 2024 and 2025.
Year-on-year data showed that debt servicing increased by N1.94tn between the two years, representing a 15.4 per cent rise. Actual spending also exceeded budget projections in both years. In 2024, debt servicing overshot the approved budget by N4.07tn, while in 2025 it exceeded the budget by N1.45tn.
Overall, debt servicing surpassed projections by about N5.52tn over the two-year period. The ministry explained that the increase was largely due to exchange rate movements rather than new borrowing.
It noted that because external debt is denominated in foreign currency, a weaker naira automatically raises the local currency cost of servicing those obligations.
“External debt is denominated in foreign currency. When the naira depreciates, the naira cost of servicing the same dollar debt rises automatically,” the document stated.
Higher domestic interest rates also contributed to the rising cost of debt servicing after the Central Bank of Nigeria tightened monetary policy in an effort to control inflation and stabilise the exchange rate.
The report further showed that debt servicing absorbed a large share of government revenue. Federal Government revenue increased from N12.48tn in 2023 to N20.98tn in 2024 due to improvements in tax administration, stronger remittance compliance and growth in non-oil revenue.
However, with N12.63tn spent on debt servicing in 2024, about 60 per cent of the government’s revenue was used to meet debt obligations. By November 2025, revenue had reached N22tn, while debt service payments stood at N14.57tn, indicating that about 66 per cent of government income was spent on servicing debt.
Despite these pressures, the government maintained significant capital spending during the period. Capital expenditure stood at N11.59tn in 2024 with an 84 per cent performance rate, while N11.7tn had been spent on capital projects by November 2025, representing 76 per cent performance.
Nevertheless, debt servicing exceeded capital expenditure in both years. In 2024, the N12.63tn spent on debt servicing surpassed capital spending by about N1.04tn.
The gap widened in 2025 when debt servicing of N14.57tn exceeded capital expenditure of N11.7tn by about N2.87tn. Combined, debt servicing exceeded capital spending by about N3.91tn over the two-year period.
The ministry said the perception that federal capital projects were not being implemented was inaccurate, noting that many projects are funded through loans tied to specific infrastructure and social programmes.
Such loans, it explained, are often disbursed directly by development partners to contractors and continue even when cash releases to ministries, departments and agencies are limited.
The brief also highlighted reforms aimed at improving fiscal transparency, including the decision to stop the extensive use of Ways and Means advances from the Central Bank of Nigeria.
According to the ministry, these overdrafts had accumulated to about N30tn before being securitised and formally recognised within the public debt framework.
Analysts, however, warn that rising debt servicing costs could continue to limit government spending on development.
Ikenna Ofoegbu of the Heinrich Böll Stiftung said the country’s high debt service burden remained a major concern, noting that between 60 and 70 per cent of government revenue is currently used to repay debt.
Similarly, Dr Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, warned that the projected N15tn debt servicing bill for 2026 could further constrain the government’s ability to fund capital projects and stimulate economic growth.
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