The Federal Government spent N27.2tn on debt servicing between 2024 and 2025, underscoring the growing pressure of rising public debt on Nigeria’s finances, a media brief from the Federal Ministry of Finance has revealed.
The document, obtained on Sunday, showed that the amount spent on servicing debts within the two-year period exceeded capital expenditure by about N3.9tn, raising fresh concerns about the country’s shrinking fiscal space.
According to the brief prepared by the Special Adviser to the Minister of Finance and Coordinating Minister of the Economy on Media and Communications, Dr Ogho Okiti, the surge in debt servicing costs was largely driven by macroeconomic adjustments, particularly the depreciation of the naira and higher domestic interest rates.
A breakdown of the figures indicated that the government spent N12.63tn on debt servicing in 2024, far above the N8.56tn initially budgeted for the year. In 2025, the debt service bill climbed further to N14.57tn, exceeding the N13.12tn provided in the budget.
Altogether, the government overshot its debt servicing projections by about N5.52tn over the two-year period.
Year-on-year data also showed that debt servicing rose by N1.94tn between 2024 and 2025, representing an increase of about 15.4 per cent.
In 2024 alone, debt servicing exceeded the approved budget by N4.07tn, while in 2025 actual payments surpassed the budget by N1.45tn.
The ministry explained that the increase was not necessarily the result of fresh borrowing but largely due to currency movements and tighter monetary conditions.
“External debt is denominated in foreign currency. When the naira depreciates, the naira cost of servicing the same dollar debt rises automatically. This is a valuation effect and not evidence of new borrowing,” the document stated.
It added that rising domestic interest rates following tighter monetary policy by the Central Bank of Nigeria also contributed to the higher cost of servicing domestic debt instruments.
Further analysis of government finances showed that debt servicing consumed a significant share of federal revenue during the period under review.
The brief noted that Federal Government revenue increased from N12.48tn in 2023 to N20.98tn in 2024, largely due to improved tax administration, stronger remittance compliance, and growth in non-oil revenue sources.
However, with N12.63tn spent on debt servicing in 2024, about 60 per cent of government revenue was used to meet debt obligations.
By November 2025, federal revenue had reached N22tn, while debt servicing stood at N14.57tn, meaning that roughly two-thirds of government earnings went into servicing debts.
This pushed the debt service-to-revenue ratio from about 60 per cent in 2024 to approximately 66 per cent by November 2025.
Despite the mounting pressure from debt repayments, the government maintained relatively strong capital spending within the same period.
Total capital expenditure stood at N11.59tn in 2024, representing 84 per cent budget performance, while N11.7tn had been spent on capital projects by November 2025, reflecting 76 per cent implementation.
However, debt servicing still outpaced capital expenditure in both years.
In 2024, the N12.63tn spent on debt servicing exceeded capital spending by about N1.04tn, while in 2025 the gap widened to N2.87tn, as debt payments of N14.57tn surpassed the N11.7tn spent on development projects.
Across the two years, debt servicing exceeded capital expenditure by about N3.91tn.
The ministry, however, rejected claims that capital projects were not being implemented, explaining that federal capital spending includes both direct budgetary releases to ministries, departments and agencies and project-tied loans from development partners.
According to the brief, multilateral and project-tied loans are disbursed directly by development partners and linked to specific infrastructure and social development projects.
“These projects proceed even when MDA cash releases are limited,” the document stated.
The ministry also highlighted fiscal reforms undertaken since 2023, particularly the decision to halt what it described as the excessive use of Ways and Means advances from the Central Bank of Nigeria.
It noted that the overdrafts had accumulated to about N30tn and were previously not transparently captured within the fiscal deficit framework.
According to the document, the advances have now been securitised and formally incorporated into the public debt framework, improving transparency in public finance reporting.
The ministry added that government deficits are now financed through structured borrowing instruments subject to legislative oversight, rather than through monetary financing.
While acknowledging concerns over the rising public debt profile, the ministry argued that a significant portion of the increase in the country’s debt stock reflects exchange rate adjustments and accounting recognition of existing liabilities, rather than new borrowing.
It said about N70tn of the nominal increase in public debt was attributable to exchange rate valuation effects following the depreciation of the naira.
The brief also cited oil revenue shortfalls as a major factor affecting the Federal Government’s finances.
In 2025, projected oil and gas federation revenue was N37.4tn, but actual inflows stood at about N7tn, representing only 19 per cent performance.
The ministry said that if the projections had been realised, the Federal Government would have received roughly N15tn more in revenue.
Economic analysts, however, warned that Nigeria’s rising debt servicing burden could continue to strain fiscal stability and limit spending on development.
The Programme Manager of the Sustainable Nigeria Programme at Heinrich Böll Stiftung, Ikenna Ofoegbu, said a large portion of government revenue was being consumed by debt obligations.
“Our debt servicing is about 60 per cent to 70 per cent. It has come down from about 80 to 90 per cent, but revenue is still largely being swallowed by debt payments,” he said.
Ofoegbu also raised concerns about transparency in public finance reporting.
Similarly, the Executive Director of the Centre for Inclusive Social Development, Folahan Johnson, warned that the social consequences of rising debt should not be ignored.
“The true cost of debts is the out-of-school child and the woman who loses access to basic maternal healthcare because the system is underfunded,” he said.
In its 2025 economic review and outlook for 2026, the Centre for the Promotion of Private Enterprise projected that Nigeria’s debt servicing could reach N15tn in 2026, further constraining fiscal space.
The Chief Executive Officer of the CPPE, Dr Muda Yusuf, said rising debt obligations continue to limit the government’s capacity to fund growth-enhancing projects.
“Debt service, estimated at over N15tn in the 2026 appropriation, continues to constrain fiscal space and the ability of government to fund capital expenditure,” Yusuf said.
Source : The Punch
'
'Do you want to share a story with us? Do you want to advertise with us? Do you need publicity for a product, service, or event? Contact us on WhatsApp +2348183319097 Email: platformtimes@gmail.com
We are committed to impactful investigative journalism for human interest and social justice. Your donation will help us tell more stories. Kindly donate any amount HERE
