Nigeria’s Federal Government spent more on interest payments in the first half of 2026 than it earned in revenue, according to the World Bank, even though federal revenue grew by more than 70 per cent over the period. The bank’s October 2026 Nigeria Development Update, titled “Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities”, puts interest payments at ₦7.7 trillion between January and June. That is 37.5 per cent higher than the ₦5.6 trillion paid in the same period of 2025, and ₦1.5 trillion more than the ₦6.2 trillion the government collected.
The bank linked the increase to high domestic borrowing costs. Interest payments rose to 3.1 per cent of Gross Domestic Product, from 2.5 per cent a year earlier. The pressure reflects a tight monetary environment, with the Central Bank of Nigeria holding its policy rate at 26.5 per cent in July, and a domestic debt portfolio dominated by FGN bonds, which stood at ₦64.84 trillion of the Federal Government’s ₦87 trillion domestic debt at the end of June, according to the Debt Management Office.
On revenue, the picture is stronger than the headline suggests. Federal revenue rose to ₦6.2 trillion, or 2.5 per cent of GDP, from ₦3.6 trillion, or 1.6 per cent, a year earlier, an increase of about 72 per cent. The World Bank credited a recovery in oil receipts, stronger corporate tax collections and higher independent revenues, while customs earnings held steady and Value Added Tax collections were largely flat.
The faster growth in revenue means the burden has eased in relative terms. In the first half of 2025, interest payments were equal to about 156 per cent of federal revenue; this year the figure is roughly 124 per cent. Put simply, for every ₦100 the government collected, it paid about ₦124 in interest. The World Bank counts only interest as expenditure, not principal repayments, so the full cost of servicing the debt is higher still.
The squeeze shows most clearly in capital spending. Reported capital expenditure fell to ₦700 billion, or 0.3 per cent of GDP, from 1.0 per cent in the first half of 2025. On these figures, the government spent about 11 times more on interest than on reported capital projects. Personnel costs rose to ₦4.2 trillion from ₦3.7 trillion after wage adjustments, meaning interest and salaries together took ₦11.9 trillion, about 74 per cent of total federal spending of ₦16.1 trillion.
The interest bill sits on a debt stock that has almost doubled in three years. Data from the Debt Management Office show total public debt at ₦166.79 trillion as of June 30, 2026, up from ₦159.35 trillion in March and ₦87.38 trillion in June 2023, shortly after President Bola Tinubu took office. Part of that growth reflects new borrowing, with external debt rising from $42.49 billion in December 2023 to $51.86 billion by December 2025. The rest reflects the weaker naira’s effect on the value of foreign loans and expanded domestic borrowing.
The Presidency has focused on other findings in the same report. President Tinubu said the update confirmed that his reforms were yielding results, pointing to economic growth of 4.2 per cent in the first half of 2026, compared with 3.9 per cent in 2025. He also highlighted the bank’s finding that the poverty rate had stabilised for the first time since 2019, and its projection of average growth of at least 4.4 per cent between 2026 and 2028.
The report also looked beyond Abuja. Higher federation revenues have flowed to the states, but in 26 of the 34 states with available data, spending grew faster than revenue, with a median rise of 134 per cent in expenditure against 79 per cent in revenue. Only Lagos and Enugu generated enough internal revenue to cover their recurrent costs. The bank further flagged a $12.4 billion unexplained gap in the country’s external accounts in the first half of the year, which it said may partly reflect oil export earnings that were not brought home.
Looking ahead, the World Bank projects that Nigeria’s consolidated fiscal deficit will 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 and personnel costs and to spending ahead of the 2027 elections. The bank urged the government to strengthen revenue collection, improve budget credibility and maintain fiscal discipline, warning that debt obligations could otherwise further limit spending on development.