The Federal Government spent N7.7tn on debt interest payments in the first half of 2026, amounting to 124.2 per cent of its total revenue of N6.2tn during the period, according to the World Bank.
The figures show that interest payments exceeded government revenue by N1.5tn between January and June 2026, raising fresh concerns about the country’s debt burden despite improvements in revenue generation.
The findings were contained in the World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities, obtained by The PUNCH.
According to the report, interest payments rose by N2.1tn, representing a 37.5 per cent increase from the N5.6tn recorded during the corresponding period of 2025. The increase was largely attributed to high domestic borrowing costs.
The World Bank stated, “Interest payments increased to 3.1 per cent of GDP (N7.7tn) from 2.5 per cent (N5.6tn) amid high domestic borrowing costs.”
An assessment of the figures showed that the interest-to-revenue ratio dropped from approximately 155.6 per cent in the first half of 2025 to 124.2 per cent in the same period of 2026, representing an improvement of 31.4 percentage points.
Despite this progress, the government’s interest obligations remained higher than its total revenue, leaving fewer resources available for infrastructure development, public services and other spending commitments.
The report also showed that Federal Government revenue grew by N2.6tn, or 72.2 per cent, from N3.6tn in the first half of 2025 to N6.2tn during the corresponding period of 2026.
The World Bank stated, “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, while customs revenues held stable and VAT collections stayed comparatively flat.”
However, the increase in revenue coincided with higher government spending. Total federal expenditure rose from N14.6tn in the first half of 2025 to N16.1tn in the same period of 2026, representing an increase of N1.5tn, or 10.3 per cent.
Personnel costs also increased from N3.7tn to N4.2tn following wage adjustments, while reported capital expenditure experienced a significant decline.
Capital spending dropped from one per cent of GDP in the first half of 2025 to 0.3 per cent of GDP, equivalent to N700bn, during the corresponding period of 2026.
Consequently, the Federal Government spent approximately 11 times more on interest payments than on reported capital projects within the six-month period.
Combined interest and personnel costs reached N11.9tn, accounting for approximately 73.9 per cent of total federal expenditure and almost twice the government’s revenue.
Despite mounting expenditure pressures, the World Bank reported that the Federal Government’s fiscal deficit narrowed from N11tn, equivalent to five per cent of GDP, in the first half of 2025 to N9.9tn, or four per cent of GDP, during the corresponding period of 2026.
However, the institution warned that the improvement was partly attributable to subdued capital spending rather than a substantial reduction in recurrent expenditure obligations.
“The improved early-year fiscal outturn should be interpreted cautiously given the low reported federal capital spending,” the report stated.
It added, “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.”
The World Bank further identified overlapping budget cycles, inadequate expenditure planning and poor alignment between approved budget allocations and implementation capacity as persistent obstacles to effective fiscal management.
Regarding Nigeria’s overall public debt, the report estimated the country’s debt stock at approximately N177tn in 2025, representing 40 per cent of GDP, compared with N67tn, 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.
The report also revealed that domestic debt represented 57.9 per cent of Nigeria’s total debt stock but accounted for 72.6 per cent of interest payments in 2025, reflecting the relatively high cost of domestic borrowing.
To ease the burden, the World Bank recommended reducing expensive borrowing, prioritising concessional financing and extending debt maturities to minimise refinancing risks.
The institution projected that Nigeria’s consolidated fiscal deficit would increase 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 expenditure.
It urged the government to strengthen revenue mobilisation, improve budget credibility and sustain fiscal discipline to prevent debt obligations from further limiting spending on development projects.
