Nigeria’s rising debt burden has continued to strain public finances, with the Federal Government spending N3.9tn more on debt servicing than on capital projects over the past two years.
A media brief from the Federal Ministry of Finance revealed that between 2024 and 2025, the government spent a combined N27.2tn servicing public debt, underscoring mounting pressure on the federal budget.
According to the document, prepared by the Special Adviser to the Minister of Finance and Coordinating Minister of the Economy on Media and Communications, Dr Ogho Okiti, the surge in debt servicing costs was largely driven by macroeconomic adjustments, including the depreciation of the naira and rising domestic interest rates.
Data in the brief showed that debt servicing reached N12.63tn in 2024, far exceeding the N8.56tn originally budgeted for the year. The figure climbed further to N14.57tn in 2025, again surpassing the N13.12tn provision in the budget.
Altogether, the government spent about N27.2tn on debt obligations in the two-year period, reflecting the impact of higher borrowing costs and exchange rate pressures.
Year-on-year, debt servicing rose by N1.94tn from 2024 to 2025, representing a 15.4 per cent increase. Actual spending also exceeded budget estimates in both years. In 2024, payments overshot projections by N4.07tn, while in 2025 the gap narrowed but still stood at N1.45tn.
In total, debt servicing exceeded budget projections by about N5.52tn over the two years.
The ministry attributed much of the increase not to new borrowing but to macroeconomic factors. It explained that external debt obligations are denominated in foreign currencies, meaning that the depreciation of the naira automatically raises the local currency cost of servicing the same debt.
“This is a valuation effect and not evidence of new borrowing,” the brief stated.
Higher domestic interest rates also contributed to the rise in servicing costs as tighter monetary policy pushed up yields on government debt instruments.
An analysis of government finances further showed that debt servicing consumed a significant share of federal revenue. Federal Government revenue rose from N12.48tn in 2023 to N20.98tn in 2024, driven by stronger tax administration, improved remittances and growth in non-oil revenue.
However, with debt servicing reaching N12.63tn in 2024, roughly 60 per cent of government revenue was used to pay debt obligations that year.
By November 2025, revenue had reached N22tn while debt service payments stood at N14.57tn, meaning nearly two-thirds of revenue went to servicing debt. The debt service-to-revenue ratio therefore rose from about 60 per cent in 2024 to roughly 66 per cent in 2025.
Despite the growing debt burden, the government maintained relatively high capital spending. Capital expenditure reached N11.59tn in 2024 with an 84 per cent implementation rate, while N11.7tn had been spent on capital projects by November 2025, representing a 76 per cent performance rate.
Nevertheless, debt servicing still outpaced capital spending in both years. In 2024, the N12.63tn spent on debt servicing exceeded capital expenditure by about N1.04tn. In 2025, the gap widened significantly, with debt servicing surpassing capital spending by about N2.87tn.
Across the two years, debt servicing exceeded capital expenditure by approximately N3.91tn.
The ministry rejected claims that capital projects were not being implemented, noting that federal capital spending includes both direct budget releases to ministries, departments and agencies and project-tied loans from development partners.
It explained that multilateral loans tied to specific infrastructure and social projects are often disbursed directly by development partners, allowing projects to continue even when cash releases to MDAs are limited.
The brief also highlighted broader fiscal reforms introduced since 2023, including the halt of what it described as the excessive use of Ways and Means advances from the Central Bank of Nigeria.
According to the ministry, these overdrafts had accumulated to about N30tn and were previously not fully reflected in the fiscal deficit framework. They have now been securitised and formally recognised as part of Nigeria’s public debt, improving transparency in fiscal reporting.
The government said deficits are now financed through structured borrowing instruments subject to legislative oversight rather than monetary financing.
While the transition has tightened fiscal space in the short term, the ministry said it is intended to restore macroeconomic credibility and strengthen long-term fiscal sustainability.
The document also clarified that a large share of the rise in Nigeria’s public debt stock reflects accounting adjustments and exchange rate effects rather than fresh borrowing.
It stated that about N30tn in Ways and Means advances had been incorporated into the official debt framework, while exchange rate movements significantly increased the naira value of external debt. According to the ministry, roughly N70tn of the nominal increase in public debt is attributable to exchange rate valuation effects.
The ministry stressed that debt sustainability should be assessed using broader indicators such as the debt-to-GDP ratio, debt service-to-revenue ratio, fiscal deficit trends and revenue growth rather than the headline size of public debt.
The brief also pointed to oil revenue shortfalls as a major fiscal challenge. In 2025, projected oil and gas federation revenue was N37.4tn, but actual inflows amounted to only about N7tn, representing just 19 per cent of the target.
If projections had been met, the Federal Government could have received roughly N15tn more in revenue, the document noted. Because oil revenue is allocated more heavily to the Federal Government than other revenue streams, shortfalls tend to affect the federal budget more severely than those of states and local governments.
Experts have warned about the implications of the rising debt service burden.
Programme Manager of the Sustainable Nigeria Programme at Heinrich Böll Stiftung, Ikenna Ofoegbu, noted that although the debt service-to-revenue ratio has improved from previous levels of 80 to 90 per cent, it still remains high at around 60 to 70 per cent.
He also criticised the lack of transparency in public finance reporting, saying many fiscal reports are not easily accessible to the public.
Executive Director of the Centre for Inclusive Social Development, Folahan Johnson, warned that the consequences of rising debt extend beyond fiscal statistics, pointing to the social costs.
“The true cost of debts is the out-of-school child and the lack of access to essential services such as maternal healthcare,” he said.
Meanwhile, the Centre for the Promotion of Private Enterprise has projected that Nigeria’s debt service bill could reach about N15tn in the 2026 budget, a development it says could constrain economic growth.
Its Chief Executive Officer, Dr Muda Yusuf, warned that debt servicing, estimated at about half of projected government revenue, would continue to limit the government’s capacity to fund infrastructure and other growth-enhancing projects.
Meristem Securities also expects public debt to rise further due to increased domestic borrowing and new external commitments tied to the wider 2026 budget deficit of N23.85tn.
However, the firm noted that debt service growth may moderate if interest rates decline and exchange rate stability is maintained.
