Nigeria’s Federal Government spent ₦7.7 trillion on interest payments in the first half of 2026, exceeding its total revenue of ₦6.2 trillion by ₦1.5 trillion, according to the World Bank.
The figures mean interest payments consumed approximately 124.2 per cent of the government’s revenue between January and June 2026, highlighting the pressure debt obligations continue to place on the country’s public finances despite an improvement in revenue collection.
The findings were contained in the World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities.
The report also showed that interest payments increased from ₦5.6 trillion in the corresponding period of 2025 to ₦7.7 trillion in the first half of 2026, representing an increase of ₦2.1 trillion, or 37.5 per cent. The bank attributed the increase largely to high domestic borrowing costs.
Interest Payments Outpace Government Revenue
The World Bank’s figures reveal a significant imbalance between the revenue available to the Federal Government and the amount spent servicing interest on its debt.
Between January and June 2026, the government generated ₦6.2 trillion in revenue but incurred ₦7.7 trillion in interest payments alone.
The difference was approximately ₦1.5 trillion, meaning the government’s earnings during the six-month period were insufficient to cover interest obligations without relying on other financing sources.
The figures concern interest payments rather than the full repayment of outstanding debt principal. Nevertheless, they illustrate the scale of the resources required to meet the government’s borrowing costs.
According to the World Bank, interest payments rose to 3.1 per cent of Nigeria’s gross domestic product (GDP) in the first half of 2026, compared with 2.5 per cent in the corresponding period of 2025.
The development raises questions about the amount of fiscal space available for infrastructure, healthcare, education and other public services, particularly when the government must also fund salaries, security and other recurrent expenditure.
Revenue Increased by 72.2 Per Cent
Despite the pressure from interest payments, the World Bank reported a substantial improvement in federal revenue during the period.
Revenue rose from ₦3.6 trillion in the first half of 2025 to ₦6.2 trillion in the first half of 2026, an increase of ₦2.6 trillion, or approximately 72.2 per cent.
The bank attributed the improvement to recovering oil receipts, stronger corporate tax collections and higher independent revenues. Customs revenue remained broadly stable, while value-added tax collections showed comparatively little improvement.
The increase suggests that the government collected considerably more revenue than it did a year earlier. However, the growth in earnings was not enough to prevent interest payments from exceeding the total amount generated.
This contrast illustrates the challenge facing Nigeria’s public finances: higher revenue does not automatically translate into additional funds for public investment when debt-related obligations are also increasing.
The report’s findings also show that the relationship between government revenue and interest expenditure remains a critical indicator of the country’s fiscal position.
Domestic Borrowing Costs Drive Interest Expenditure
The World Bank identified high domestic borrowing costs as a major factor behind the increase in interest payments.
When governments borrow through domestic financial markets, the interest rates attached to their securities influence how much they must spend to finance their obligations.
Higher borrowing costs can increase the expense of servicing existing debt as securities mature and are refinanced, while new borrowing may also carry higher interest charges.
For Nigeria, the World Bank’s figures indicate that interest expenditure increased substantially even as revenue improved.
The increase from ₦5.6 trillion to ₦7.7 trillion represents a 37.5 per cent rise in interest payments within one year. Over the same period, federal revenue increased from ₦3.6 trillion to ₦6.2 trillion.
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 first half of 2026, interest payments continued to exceed federal earnings.
The improvement in the ratio indicates that revenue grew faster than interest expenditure over the period. However, the government still faced a substantial gap between its income and interest obligations.
Capital Spending Fell to ₦700bn
The World Bank also highlighted a decline in reported capital expenditure during the first half of 2026.
Capital spending fell from ₦1 trillion, equivalent to 1 per cent of GDP, in the first half of 2025 to approximately ₦700 billion, or 0.3 per cent of GDP, in the corresponding period of 2026.
Capital expenditure generally covers investment in assets and projects such as roads, bridges, public infrastructure and other developments intended to support economic activity.
The decline is significant because capital projects can help improve productivity, support businesses and expand access to essential services.
However, the World Bank’s figures do not establish that higher interest payments alone caused the reduction in capital spending. They show that interest expenditure increased while reported capital spending declined during the same period.
The combination nevertheless highlights the competing demands on the government’s finances and the importance of improving revenue generation and expenditure management.
Total Federal Expenditure Reached ₦16.1tn
The report showed that total federal expenditure increased from ₦14.6 trillion in the first half of 2025 to ₦16.1 trillion in the first half of 2026.
Despite the increase in the nominal amount spent, total expenditure declined slightly as a share of GDP, from 6.6 per cent to 6.5 per cent.
Personnel costs also increased, rising from ₦3.7 trillion to ₦4.2 trillion following wage adjustments. The World Bank said personnel expenditure remained unchanged at 1.7 per cent of GDP.
These figures show that interest payments represent one of several major demands on federal resources.
The government must meet its debt obligations while also funding personnel costs, capital projects and other public expenditure.
With interest payments alone exceeding revenue, the government’s ability to expand spending in other areas depends partly on additional financing, stronger revenue performance and the management of other expenditure commitments.
World Bank Highlights Broader Economic Improvements
Despite its concerns about the composition of government spending, the World Bank reported improvements in several areas of Nigeria’s economy.
According to its October 2026 update, Nigeria’s real GDP grew by 4.2 per cent in the first half of 2026, compared with 3.9 per cent in the corresponding period of 2025 and 3.5 per cent in the first half of 2024.
The bank said growth was driven largely by the services sector, alongside a stronger contribution from agriculture.
It also reported that higher global oil prices strengthened export earnings and supported federal revenue, although the gains were moderated by existing oil pre-commitments under forward sales and oil-backed financing arrangements.
However, the bank warned that higher oil prices had temporarily interrupted the decline in inflation that began in early 2025.
Headline inflation fell from 27.6 per cent in January 2025 to 15.2 per cent in December 2025, but higher fuel prices and food-price pressures subsequently slowed further progress.
The World Bank said inflation remained elevated and continued to weigh on household purchasing power.
These developments demonstrate that improvements in economic growth and revenue collection can occur alongside continuing fiscal and cost-of-living challenges.
Debt Costs Remain a Major Fiscal Challenge
The latest figures place the cost of borrowing at the centre of discussions about Nigeria’s fiscal sustainability.
The increase in federal revenue offers some improvement compared with the first half of 2025, but the government continues to spend more on interest payments than it collects in revenue.
Reducing the pressure will depend on several factors, including the government’s ability to sustain revenue growth, manage borrowing costs and allocate available resources efficiently.
The decline in reported capital spending also highlights the importance of ensuring that debt obligations do not leave insufficient room for investments that support long-term economic growth.
For households and businesses, the implications extend beyond government accounting. Public expenditure on infrastructure and services can influence transport costs, business productivity, access to education and healthcare, and the broader economic environment.
The World Bank’s October update therefore presents a mixed picture: Nigeria’s economy has continued to grow and federal revenue has improved, but rising interest payments and lower reported capital expenditure remain significant concerns.
With interest payments consuming 124.2 per cent of federal revenue in the first half of 2026, the figures underscore the scale of the challenge facing policymakers as they seek to balance debt obligations with the need to fund public services and economic development.
