By Sandra Kenneth
The Federal Government of Nigeria spent ₦7.7tn on debt interest payments during the first half of 2026, representing 124.2 per cent of its total revenue of ₦6.2tn for the same period, according to a report by the World Bank.
The figures reveal that interest obligations alone exceeded the federal government’s total revenue by ₦1.5tn between January and June 2026, highlighting persistent fiscal pressures despite improvements in revenue generation.
The details were disclosed in the World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities.
According to the report, interest payments climbed by 37.5 per cent (₦2.1tn) compared to ₦5.6tn recorded in the first half of 2025. The World Bank attributed this increase primarily to elevated domestic borrowing costs, noting that interest payments grew to 3.1 per cent of GDP, up from 2.5 per cent a year earlier.
Although the interest-to-revenue ratio improved—dropping from 155.6 per cent in H1 2025 to 124.2 per cent in H1 2026—servicing commitments continued to outpace earnings, significantly restricting funding available for critical public investments and infrastructure.
Revenue Growth Overshadowed by Recurrent Spending
Federal revenue expanded by 72.2 per cent (₦2.6tn) year-on-year, rising from ₦3.6tn in H1 2025 to ₦6.2tn in H1 2026. The multilateral lender noted that revenue reached 2.5 per cent of GDP, bolstered by recovering oil receipts, enhanced corporate tax collections, and higher independent revenues, while customs duties remained steady and VAT collections stayed relatively flat.
However, total federal expenditure grew by 10.3 per cent, moving from ₦14.6tn to ₦16.1tn over the six-month period. Personnel costs rose from ₦3.7tn to ₦4.2tn following nationwide wage adjustments.
Combined, interest obligations and personnel expenditures totaled ₦11.9tn—accounting for 73.9 per cent of total government spending and nearly double total revenues collected.
Sharp Decline in Capital Execution
In contrast to rising recurrent expenditures, capital spending dropped sharply. Reported capital expenditure fell from 1 per cent of GDP in H1 2025 to 0.3 per cent (₦700bn) in H1 2026. Consequently, the Federal Government allocated 11 times more resources toward interest payments than toward reported capital projects during the period.
Despite expenditure constraints, the federal fiscal deficit narrowed from ₦11tn (5 per cent of GDP) in H1 2025 to ₦9.9tn (4 per cent of GDP) in H1 2026. However, the World Bank cautioned against viewing this improvement as a structural shift, noting that the reduced deficit was primarily driven by delayed capital execution rather than reduced overhead.
Looking ahead, the World Bank projected the consolidated fiscal deficit to reach 3.5 per cent of GDP for the full year 2026. To mitigate long-term refinancing risks, the institution recommended prioritizing concessional financing, extending debt maturities, and strengthening budget planning and execution.
