Nigeria’s Federal Government spent more on interest payments on its debts than it generated in total revenue during the first half of 2026, highlighting mounting fiscal pressures despite a significant increase in government earnings.
According to the World Bank’s October 2026 Nigeria Development Update, the Federal Government paid N7.7 trillion in debt interest between January and June, representing 124.2 per cent of its total revenue of N6.2 trillion. The interest bill exceeded revenue by N1.5 trillion.
The findings, contained in a report titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities, underscore the challenge facing the government as rising borrowing costs continue to limit funds available for infrastructure, healthcare, education and other public services.
The World Bank attributed the increase in interest payments largely to high domestic borrowing costs.
Interest expenses rose by N2.1 trillion, or 37.5 per cent, from N5.6 trillion recorded in the corresponding period of 2025.
The amount spent on interest payments also increased from 2.5 per cent of gross domestic product in the first half of 2025 to 3.1 per cent in the first half of 2026.
Despite the growing debt burden, the government recorded a significant improvement in revenue collection. Federal revenue increased by 72.2 per cent, rising from N3.6 trillion in the first half of 2025 to N6.2 trillion during the same period this year.
The World Bank attributed the improvement to stronger oil receipts, increased corporate tax collections and higher independent revenues. Customs revenue remained relatively stable, while value-added tax collections recorded comparatively little growth.
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 corresponding period of 2026, the government continued to spend more on debt interest than it earned.
Meanwhile, total federal expenditure rose by 10.3 per cent, from N14.6 trillion to N16.1 trillion during the six-month period. Personnel costs also increased from N3.7 trillion to N4.2 trillion following wage adjustments.
Combined interest and personnel expenditure amounted to N11.9 trillion, representing about 73.9 per cent of total federal spending.
The pressure on public finances was particularly evident in capital expenditure. Reported capital spending fell sharply from one per cent of GDP in the first half of 2025 to 0.3 per cent in the corresponding period of 2026, equivalent to approximately N700 billion.
This meant the government spent roughly 11 times more on interest payments than on reported capital projects, raising concerns about its capacity to finance development priorities.
The fiscal deficit nevertheless narrowed from N11 trillion, or five per cent of GDP, in the first half of 2025 to N9.9 trillion, or four per cent of GDP, in the same period of 2026.
However, the World Bank cautioned that the improvement should be interpreted carefully because subdued capital expenditure contributed to the lower deficit.
The report estimated Nigeria’s public debt stock at approximately N177 trillion in 2025, equivalent to 40 per cent of GDP, compared with N67 trillion, or 27.6 per cent of GDP, in 2021.
Domestic debt accounted for 57.9 per cent of the debt stock but generated 72.6 per cent of interest payments in 2025, reflecting the relatively high cost of domestic borrowing.
The World Bank recommended limiting expensive borrowing, prioritising concessional financing and extending debt maturities to reduce refinancing risks. It also urged stronger revenue mobilisation, improved budget credibility and greater fiscal discipline to prevent debt obligations from further constraining economic development.
