The Federal Government spent N7.7tn on debt servicing in the form of interest payments in the first half of 2026, exceeding its total revenue of N6.2tn by N1.5tn, according to the World Bank.
The figures highlight the growing pressure of debt obligations on Nigeria’s public finances, with interest payments accounting for 124.2 per cent of revenue generated between January and June 2026.
The disclosure was contained in the World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities.
The report showed that interest payments rose by N2.1tn, representing a 37.5 per cent increase from the N5.6tn recorded in the corresponding period of 2025.
The bank attributed the increase largely to high domestic borrowing costs, noting that interest payments climbed to 3.1 per cent of gross domestic product (GDP), compared with 2.5 per cent a year earlier.
“Interest payments increased to 3.1 per cent of GDP (N7.7tn) from 2.5 per cent (N5.6tn) amid high domestic borrowing costs,” the report stated.
Despite the increase in interest obligations, the Federal Government recorded an improvement in its interest-to-revenue ratio, which declined from approximately 155.6 per cent in the first half of 2025 to 124.2 per cent in the corresponding period of 2026.
The improvement was supported by stronger revenue performance, although the government continued to spend more on interest payments than it generated in total revenue.
According to the World Bank, federal revenue increased by N2.6tn, or 72.2 per cent, from N3.6tn in the first half of 2025 to N6.2tn in the same period of 2026.
The growth was attributed to improved oil receipts, stronger corporate tax collections and higher independent revenues. Customs revenue remained stable, while value-added tax collections recorded relatively little change.
“Federal revenues rose to about 2.5 per cent of GDP (N6.2tn), from 1.6 per cent of GDP (N3.6tn) a year earlier, supported by a recovery in oil receipts, stronger corporate tax collections, and higher independent revenues,” the report said.
However, the increase in revenue was accompanied by higher expenditure, limiting the fiscal relief available to the government.
Total federal spending rose from N14.6tn in the first half of 2025 to N16.1tn in the corresponding period of 2026, an increase of N1.5tn or 10.3 per cent.
Personnel costs also increased from N3.7tn to N4.2tn following wage adjustments, further adding to the government’s recurrent expenditure burden.
In contrast, capital expenditure declined significantly, falling from one per cent of GDP in the first half of 2025 to 0.3 per cent in the first half of 2026, equivalent to approximately N700bn.
The figures indicate that interest payments alone were about 11 times the reported capital expenditure during the six-month period, raising concerns about the resources available for infrastructure and other development projects.
Combined interest and personnel costs reached N11.9tn, accounting for approximately 73.9 per cent of total federal expenditure and nearly twice the revenue generated during the period.
The World Bank nevertheless reported an improvement in the government's fiscal balance, with the federal deficit narrowing to N9.9tn, equivalent to four per cent of GDP, from N11tn or five per cent of GDP in the first half of 2025.
However, the institution cautioned that the improvement should not be interpreted as evidence of a fundamental easing of fiscal pressures, as lower capital spending contributed to the reduced deficit.
“The improved early-year fiscal outturn should be interpreted cautiously given the low reported federal capital spending,” the report stated.
It warned that pressure on public finances could intensify later in the year as capital projects gather pace and the government faces additional recurrent and pre-election spending obligations.
“Personnel and interest costs continue to absorb a large share of fiscal space, and a pickup in capital execution later in the year, alongside recurrent and pre-election spending, is expected to add to pressures,” it added.
The report also identified weaknesses in budget implementation, including overlapping budget cycles, inadequate expenditure planning and poor alignment between approved allocations and the government's capacity to execute projects.
Debt Stock Hits N177tn
On Nigeria's overall debt position, the World Bank estimated the country's public debt stock at approximately N177tn in 2025, representing 40 per cent of GDP.
This compared with N67tn, equivalent to 27.6 per cent of GDP, in 2021.
The bank explained that the increase reflected 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, underscoring the relatively high cost of borrowing within the domestic market.
The World Bank recommended that the government reduce reliance on expensive borrowing, prioritise concessional financing and extend debt maturities to minimise refinancing risks.
It also called for stronger revenue mobilisation, more credible budget planning and stricter fiscal discipline to ensure that debt obligations do not continue to crowd out spending on infrastructure and essential public services.
The institution 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.
The projected deterioration was attributed partly to rising federal interest payments, personnel costs and pre-election expenditure.
It warned that without sustained improvements in revenue generation and expenditure management, the rising cost of servicing public debt could further restrict the government's capacity to finance economic development.
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