MorganaBLE economy watch
Personnel expenditure also increased from N3.7tn to N4.2tn following wage adjustments, while reported capital expenditure declined considerably.
KaNo —
The Federal Government spent N7.7tn on interest payments in the first half of 2026, exceeding its total revenue of N6.2tn by N1.5tn, according to the World Bank.
The development indicates that interest payments consumed 124.2 per cent of government revenue between January and June 2026, highlighting the growing pressure of Nigeria’s debt obligations on public finances despite improvements in revenue generation.
The figures were contained 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 increased by N2.1tn, representing 37.5 per cent, compared with the N5.6tn recorded during the corresponding period of 2025.
The increase was attributed largely to high domestic borrowing costs, which continued to place considerable pressure on government expenditure.
The World Bank stated, “Interest payments increased to 3.1 per cent of GDP (N7.7tn) from 2.5 per cent (N5.6tn) amid high domestic borrowing costs.”
An analysis of the figures showed that the interest-to-revenue ratio declined from approximately 155.6 per cent in the first half of 2025 to 124.2 per cent in the corresponding period of 2026.
Although the decline represented an improvement of 31.4 percentage points, the government continued to spend more on interest obligations than it generated in revenue, limiting resources available for infrastructure development and essential public services.
The report revealed that Federal Government revenue increased significantly from N3.6tn in the first half of 2025 to N6.2tn during the corresponding period of 2026, representing an increase of N2.6tn or 72.2 per cent.
The improvement was supported by increased oil receipts, stronger corporate tax collections and higher independent revenues.
“Federal revenues rose to about 2.5 per cent of GDP (N6.2tn), from 1.6 per cent of GDP (N3.6tn) a year earlier, supported by a recovery in oil receipts, stronger corporate tax collections, and higher independent revenues, while customs revenues held stable and VAT collections stayed comparatively flat,” the report stated.
Despite the revenue improvement, government expenditure continued to rise, increasing from N14.6tn in the first half of 2025 to N16.1tn during the corresponding period of 2026.
The N1.5tn increase represented a 10.3 per cent rise in federal expenditure, reflecting persistent pressure from recurrent obligations.
Personnel expenditure also increased from N3.7tn to N4.2tn following wage adjustments, while reported capital expenditure declined considerably.
According to the report, capital spending dropped from one per cent of GDP in the first half of 2025 to 0.3 per cent, equivalent to N700bn, during the corresponding period of 2026.
The figures indicate that the Federal Government spent approximately 11 times more on interest payments than on reported capital projects during the six-month period.
Combined interest payments and personnel expenditure amounted to N11.9tn, accounting for approximately 73.9 per cent of total federal expenditure and nearly twice the revenue generated within the period.
The development raises concerns about the government’s capacity to finance infrastructure projects and improve public services while meeting its rising financial obligations.
However, the World Bank reported that Nigeria recorded an improvement in its fiscal balance, with the Federal Government’s deficit declining from N11tn, representing five per cent of GDP, in the first half of 2025 to N9.9tn, equivalent to four per cent of GDP, during the corresponding period of 2026.
The institution cautioned that the improvement was partly attributable to low capital expenditure rather than a substantial reduction in recurrent spending.
“The improved early-year fiscal outturn should be interpreted cautiously given the low reported federal capital spending,” the report stated.
It added, “Personnel and interest costs continue to absorb a large share of fiscal space, and a pickup in capital execution later in the year, alongside recurrent and pre-election spending, is expected to add to pressures.”
The World Bank further identified overlapping budget cycles, weak expenditure planning and poor alignment between approved budget allocations and implementation capacity as persistent challenges affecting Nigeria’s fiscal management.
On the country’s broader debt position, the report estimated Nigeria’s public debt stock at approximately N177tn in 2025, representing 40 per cent of GDP.
This marked a significant increase from N67tn, equivalent to 27.6 per cent of GDP, recorded in 2021.
The institution explained that exchange-rate valuation effects and the recognition of previously accumulated liabilities, including securitised Ways and Means advances, contributed significantly to the increase in public debt.
It also revealed that domestic debt accounted for 57.9 per cent of Nigeria’s total debt stock but generated 72.6 per cent of interest payments in 2025, reflecting the relatively high cost of borrowing domestically.
To address the challenge, the World Bank recommended limiting expensive borrowing, prioritising concessional financing and extending debt maturities to reduce refinancing risks.
The institution projected that Nigeria’s consolidated fiscal deficit would widen from 3.1 per cent of GDP in 2025 to 3.5 per cent in 2026, partly due to rising interest payments, personnel costs and pre-election expenditure.
It urged the Federal Government to strengthen revenue mobilisation, improve budget credibility and maintain fiscal discipline to prevent debt obligations from further restricting development spending.
Meanwhile, President Bola Tinubu welcomed the World Bank’s latest economic assessment, describing its findings as evidence that his administration’s economic reforms were producing positive results.
In a statement issued on Sunday by his Special Adviser on Information and Strategy, Bayo Onanuga, the President said the report confirmed that Nigeria’s economy was moving towards greater stability and sustainable growth.
Tinubu particularly welcomed the finding that the country’s poverty rate had stabilised for the first time since 2019, alongside projections that poverty would gradually decline as economic growth outpaced population growth.
The report showed that Nigeria’s economy expanded by 4.2 per cent in the first half of 2026, compared with 3.9 per cent recorded during the corresponding period of 2025, despite the effects of the conflict in the Middle East.
The World Bank also projected that economic growth would average at least 4.4 per cent between 2026 and 2028.
On inflation, the institution reported that the rate declined from 27.6 per cent in January 2025 to 15.2 per cent in December 2025.
While the government welcomed the improved economic indicators, the report underscored the need for sustained fiscal reforms to ensure that rising revenue translates into increased investment in infrastructure, essential services and economic development.
