By Obinna Uballa
Nigeria’s growing debt burden is raising fresh fiscal concerns after the Federal Government spent about N3.9tn more on servicing debt than on capital projects between 2024 and 2025.
A media brief from the Federal Ministry of Finance, obtained on Sunday, showed that the government spent a total of N27.2tn servicing public debt within the two-year period.
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, explained that the sharp increase in debt servicing costs was largely driven by macroeconomic adjustments, including the depreciation of the naira and higher domestic interest rates.
According to the data, the Federal Government spent N12.63tn servicing debt in 2024, significantly higher than the N8.56tn allocated for that purpose in the year’s budget.
Debt servicing rose further in 2025, reaching N14.57tn, compared with the N13.12tn initially budgeted. Combined, the figures show that the government spent about N27.2tn on debt servicing over the two years.
A year-on-year comparison indicates that debt servicing increased by N1.94tn between 2024 and 2025, representing a 15.4 per cent rise. Actual spending on debt servicing also exceeded budget projections in both years. In 2024, payments overshot the budget by N4.07tn, while in 2025 the excess stood at N1.45tn.
Overall, debt servicing exceeded budget estimates by about N5.52tn across the two-year period. The ministry attributed the surge largely to exchange rate movements and rising interest rates rather than fresh borrowing.
It explained that a weaker naira automatically increases the local currency cost of servicing external debt obligations.
“External debt is denominated in foreign currency. When the naira depreciates, the naira cost of servicing the same dollar debt rises automatically,” the document stated, describing the development as a valuation effect rather than evidence of new borrowing.
Higher domestic interest rates also contributed to the increase, as the Central Bank of Nigeria tightened monetary policy to curb inflation and stabilise the exchange rate, raising the cost of servicing domestic debt instruments.
The report also showed that debt servicing continued to absorb a significant portion of government revenue during the review period.
Federal Government revenue rose from N12.48tn in 2023 to N20.98tn in 2024, driven by improved tax administration, better remittance compliance and stronger non-oil revenue performance.
However, with debt servicing reaching N12.63tn in 2024, about 60 per cent of the government’s revenue was used to repay debt obligations.
By November 2025, government revenue had reached N22tn, while debt service payments stood at N14.57tn, indicating that roughly 66 per cent of revenue was devoted to debt servicing.
Despite these pressures, the government maintained relatively high capital spending over the period.
Capital expenditure stood at N11.59tn in 2024, representing an 84 per cent budget performance, while N11.7tn had been spent on capital projects by November 2025, translating to a 76 per cent performance rate.
However, debt servicing continued to outpace capital investment. In 2024, the N12.63tn spent on debt servicing exceeded capital spending by about N1.04tn.
The gap widened in 2025, when debt servicing of N14.57tn exceeded capital expenditure of N11.7tn by about N2.87tn. Across the two years, debt servicing exceeded capital spending by about N3.91tn.
The ministry argued that the perception that capital projects were not being implemented was inaccurate, noting that many federal projects are funded through project-tied loans from development partners, which are disbursed directly to contractors rather than through ministry cash releases.
The document also highlighted fiscal reforms introduced by the government since 2023, including the decision to halt the extensive use of Ways and Means advances from the Central Bank of Nigeria.
According to the ministry, these overdrafts had accumulated to about N30tn before being securitised and formally incorporated into the public debt framework, improving transparency in fiscal reporting.
It added that fiscal deficits are now financed through structured borrowing instruments subject to legislative oversight rather than direct monetary financing.
The ministry also addressed concerns over Nigeria’s rising public debt stock, stating that a significant portion of the increase reflects exchange-rate adjustments and accounting changes rather than new borrowing.
According to the document, about N70tn of the nominal rise in public debt is linked to exchange-rate valuation effects.
However, analysts have warned that rising debt service costs could continue to constrain government spending.
The Programme Manager of the Sustainable Nigeria Programme at Heinrich Böll Stiftung, Ikenna Ofoegbu, said Nigeria’s high borrowing costs remained a concern.
“Our debt servicing is about 60 to 70 per cent of revenue. Although it has dropped from around 80 to 90 per cent previously, it is still very high,” he said.
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, also warned that rising debt service obligations would limit fiscal flexibility.
He noted that the projected N15tn debt servicing bill in the 2026 budget could constrain government spending on infrastructure and other growth-enhancing projects.
