Nigeria Debt Servicing Outpaces Capital Investment by N3.9 Trillion Amid Severe Macroeconomic Pressures

Nigeria spent N27.2tn on debt servicing in two years, outstripping capital expenditure by N3.9tn as naira depreciation and high interest rates pressure the budget.

By: AXL Media

Published: Mar 9, 2026, 6:19 AM EDT

Source: The information in this article was sourced from Business Hallmark

The Growing Shadow of Public Debt

Nigeria’s fiscal landscape has come under intense scrutiny following a media brief from the Federal Ministry of Finance detailing a massive imbalance in government spending. Between 2024 and 2025, the federal government directed N3.9 trillion more toward servicing its debt than it did toward funding capital projects. This trend highlights the precarious nature of the nation's finances, as the cumulative debt service cost reached N27.2 trillion over the two year period. The growing burden of these payments is increasingly viewed as a primary constraint on the administration’s ability to fund essential social and infrastructure programs.

Macroeconomic Catalysts for Rising Costs

According to Dr. Ogho Okiti, Special Adviser to the Minister of Finance, the surge in servicing costs is not primarily driven by new borrowing but by volatile macroeconomic factors. The depreciation of the naira has had a mechanical effect on external debt, which is denominated in foreign currency, effectively raising the local cost of repayments. Simultaneously, the Central Bank of Nigeria has implemented aggressive monetary tightening to combat inflation. These higher domestic interest rates have further inflated the cost of maintaining the government's internal debt portfolio, leading to actual spending exceeding budget projections by N5.52 trillion over the 2024-2025 window.

Debt Consumption of National Revenue

The impact of these rising costs on the national treasury is reflected in the tightening debt to revenue ratio. While the Federal Government successfully increased its revenue from N12.48 trillion in 2023 to N20.98 trillion in 2024 through better tax compliance and non oil sector growth, these gains were largely offset by debt obligations. In 2024, approximately 60% of all government income was consumed by debt servicing. By late 2025, this figure had escalated to 66%, leaving a diminishing share of the national budget for development, healthcare, and education.