Deepening Fiscal Crises Worry Stakeholders, Investors As FG Spends 11 Times More On Debt Servicing Than Capital Projects

Deepening Fiscal Crises Worry Stakeholders

 

OpenLife News reports that stakeholders and investors have raised fresh alarm over Nigeria’s deepening fiscal crisis, after the Federal Government spent 11 times more on debt servicing than on capital projects in the first half of 2026, a development experts say exposes poor economic management and threatens long-term growth.

The concern follows revelations in the World Bank’s October 2026 Nigeria Development Update titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities, which showed that government spent N7.7 trillion on interest payments alone between January and June 2026.

The amount, according to the report, represents 124.2 per cent of the Federal Government’s total revenue of N6.2 trillion for the period, meaning interest payments exceeded revenue by N1.5 trillion.

“Interest payments increased to 3.1 per cent of GDP (N7.7tn) from 2.5 per cent (N5.6tn) amid high domestic borrowing costs,” the World Bank stated.

Analysts say the figures, despite improved revenue collection, confirm that Nigeria’s debt burden has become unsustainable, leaving little for infrastructure, public services and productive investments.

The N7.7 trillion interest bill marked an increase of N2.1 trillion, or 37.5 per cent, from N5.6 trillion recorded in the first half of 2025, largely driven by high domestic borrowing costs.

While revenue rose by 72.2 per cent from N3.6 trillion to N6.2 trillion, supported by recovery in oil receipts, stronger corporate tax and independent revenues, expenditure pressures wiped out the gains.

Total federal spending climbed to N16.1 trillion from N14.6 trillion, with personnel cost rising from N3.7 trillion to N4.2 trillion after wage adjustments.

In sharp contrast, capital expenditure — which funds roads, rail, power, health and education infrastructure — crashed from 1 per cent of GDP in H1 2025 to just 0.3 per cent of GDP, equivalent to N700 billion.

Stakeholders say this lopsided spending pattern explains Nigeria’s worsening infrastructure deficit and sluggish economic growth.

By spending N7.7 trillion to service debt and only N700 billion to build infrastructure, the government spent 11 times more on creditors than on capital projects that create jobs and boost productivity.

Combined, interest and personnel costs gulped N11.9 trillion, about 73.9 per cent of total spending and nearly twice government’s revenue.

Investors worry that such a fiscal structure signals low budget credibility and weak planning.

The World Bank also flagged overlapping budget cycles, poor expenditure planning and misalignment between approved allocations and implementation capacity as persistent problems.

The Bank noted that although the fiscal deficit narrowed from N11 trillion (5% of GDP) in H1 2025 to N9.9 trillion (4% of GDP) in H1 2026, the improvement was deceptive.

“The improved early-year fiscal outturn should be interpreted cautiously given the low reported federal capital spending,” it warned.

“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.”

Nigeria’s overall public debt stock has now hit an estimated N177 trillion in 2025, representing 40 per cent of GDP, up from N67 trillion or 27.6 per cent in 2021, driven by exchange-rate valuation and securitised Ways and Means advances.

More concerning to analysts, domestic debt accounted for 57.9 per cent of total debt but generated 72.6 per cent of interest payments in 2025, reflecting government’s reliance on expensive domestic borrowing.

The World Bank projects the consolidated fiscal deficit to widen to 3.5 per cent of GDP in 2026 from 3.1 per cent in 2025, due to rising interest, personnel and pre-election spending, and has advised government to limit expensive borrowing, prioritise concessional loans and extend maturities.

For stakeholders, the message is clear: unless government cuts wasteful recurrent spending, improves revenue mobilisation and channels more resources into infrastructure, Nigeria risks being trapped in a cycle of borrowing to pay interest, while critical sectors remain starved of investment.