The Federal Government spent N7.7tn on debt interest payments between January and June 2026, exceeding its total revenue of N6.2tn by N1.5tn, according to the World Bank.
The figures highlight the pressure debt servicing continues to place on Nigeria’s public finances, despite a significant increase in revenue collections during the period.
The data are 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 represented 124.2 per cent of federal revenue in the first half of 2026. Although this was an improvement on the previous year, the government still spent more on servicing debt than it generated in revenue.
Interest payments rose by N2.1tn, or 37.5 per cent, from N5.6tn in the corresponding period of 2025 to N7.7tn in the first half of 2026. 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.”
Despite the increase in interest costs, the ratio of debt interest to revenue improved from about 155.6 per cent in the first half of 2025 to 124.2 per cent in the same period of 2026, a decline of 31.4 percentage points.
The improvement reflected stronger revenue performance, although interest obligations continued to consume more than the government’s entire income, restricting the resources available for infrastructure, public services and other development priorities.
Revenue rises by 72.2 per cent
Federal Government revenue climbed by N2.6tn, or 72.2 per cent, from N3.6tn in the first half of 2025 to N6.2tn in the corresponding period of 2026.
The World Bank attributed the growth to a recovery in oil receipts, stronger corporate tax collections and higher independent revenues. Customs revenue remained stable, while value-added tax collections recorded comparatively 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, while customs revenues held stable and VAT collections stayed comparatively flat,” the report stated.
However, the increase in revenue was accompanied by higher government expenditure. Total federal spending rose by N1.5tn, or 10.3 per cent, from N14.6tn in the first half of 2025 to N16.1tn in the same period of 2026.
Personnel costs increased from N3.7tn to N4.2tn following wage adjustments, adding to the government’s recurrent expenditure burden.
Capital expenditure, meanwhile, recorded a sharp decline. Reported capital spending fell from one per cent of gross domestic product in the first half of 2025 to 0.3 per cent in the corresponding period of 2026, equivalent to about N700bn.
Based on the reported figures, the Federal Government spent approximately 11 times as much on debt interest as it did on capital projects during the six-month period.
Interest and personnel costs combined reached N11.9tn, accounting for about 73.9 per cent of total federal expenditure and nearly twice the government’s revenue.
World Bank warns against interpreting deficit reduction as fiscal relief
Despite the rise in spending, 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, in the same period of 2026.
The World Bank, however, cautioned that the improvement should be viewed carefully because the government’s reported capital expenditure remained low.
“The improved early-year fiscal outturn should be interpreted cautiously given the low reported federal capital spending,” the report stated.
It added that personnel and interest payments continued to absorb a substantial share of available fiscal resources, leaving the budget vulnerable to additional spending pressures later in the year.
“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 institution said.
The report also identified overlapping budget cycles, weak expenditure planning and poor alignment between approved budget allocations and implementation capacity as persistent weaknesses in public financial management.
These challenges, it noted, could undermine the effective execution of government budgets and make it more difficult to direct resources towards development projects.
Public debt rises to N177tn
Nigeria’s public debt stock stood at approximately N177tn in 2025, equivalent to 40 per cent of GDP, compared with N67tn, or 27.6 per cent of GDP, in 2021, according to the report.
The World Bank said exchange-rate valuation effects and the recognition of previously accumulated liabilities contributed significantly to the increase. These included securitized Ways and Means advances, which represent government borrowing from the Central Bank of Nigeria.
Domestic debt accounted for 57.9 per cent of the country’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.
To reduce the pressure, the World Bank recommended limiting expensive borrowing, giving greater priority to concessional financing and extending debt maturities to lower refinancing risks.
Concessional loans typically offer more favourable interest rates and repayment terms than commercial borrowing, potentially reducing the cost of financing government programmes over time.
The institution also 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. It attributed the expected increase partly to rising federal interest payments, personnel costs and pre-election spending.
The World Bank urged the government to strengthen revenue mobilization, improve budget credibility and maintain fiscal discipline to prevent debt-servicing obligations from further limiting funds available for infrastructure and other development priorities.
