Rising borrowing costs, weak revenue and widening deficits squeeze capital spending
Nigeria’s Federal Government under President Bola Tinubu is projected to spend more than ₦91 trillion on debt servicing between 2023 and 2028, underscoring the growing fiscal strain caused by rising public debt and persistently weak revenue generation.
The estimate is derived from an analysis of debt service provisions in the 2023 and 2024 budgets, the 2025 Appropriation Act, and forward projections contained in the Medium-Term Expenditure Framework (MTEF) for 2026–2028.
The size of the projected obligation reflects a combination of ballooning fiscal deficits, rapid debt accumulation, and elevated interest rates, trends that have intensified since the beginning of the current administration.
Debt service rising faster than budget targets
Available data shows that federal debt service obligations have consistently exceeded budget expectations.
In 2023, the government budgeted ₦6.56 trillion for debt servicing but ultimately spent ₦8.56 trillion, overshooting the target by about ₦2 trillion.
The situation worsened in 2024, when actual debt service reached ₦12.63 trillion, far above the ₦8.27 trillion initially provided in the budget.
For 2025, debt service has been set at ₦14.32 trillion. However, by the end of the first seven months of the year, actual spending had already hit ₦9.8 trillion, exceeding the pro-rated benchmark of ₦8.35 trillion. If the trend continues, full-year spending is again expected to surpass projections.
Looking ahead, the MTEF forecasts debt service of ₦15.9 trillion in 2026, rising to ₦19.8 trillion in 2027 and 2028. While total budgeted debt service for the six-year period stands at ₦84.6 trillion, historical overruns suggest the final figure could exceed ₦91 trillion.
Capital spending crowded out
As debt obligations rise, capital expenditure is increasingly being squeezed, despite government plans to invest ₦114.8 trillion in capital projects over the same period.
In 2023, actual capital spending stood at ₦6.3 trillion, well below the ₦8.56 trillion spent on debt service.
The gap widened in 2024, with capital expenditure trailing debt service by ₦11.5 trillion, as interest and principal repayments absorbed a larger share of public funds.
The trend has worsened in 2025. Pro-rated capital releases for the first seven months amount to just ₦3.59 trillion, compared with a pro-rated budget expectation of ₦13.6 trillion, suggesting that infrastructure and development projects are once again bearing the brunt of fiscal pressure.
Revenue weakness deepens fiscal stress
Nigeria’s growing debt service burden is closely tied to weak and volatile government revenues, which have failed to keep pace with rising expenditure.
In 2023, actual revenue of ₦12.48 trillion marginally exceeded budget estimates, but the improvement proved short-lived.
By 2024, actual revenue declined to ₦20.98 trillion, falling short of budget targets by nearly ₦5 trillion and forcing additional borrowing.
Early indicators for 2025 are also concerning. Pro-rated aggregate revenue for the first seven months is estimated at ₦13.6 trillion, significantly below the pro-rated budget expectation of ₦23.8 trillion. If this gap persists, Nigeria risks ending the year with a sharply higher debt service-to-revenue ratio, a key indicator of fiscal vulnerability.
Debt stock and interest rates add pressure
Beyond revenue shortfalls, Nigeria’s debt service costs are being amplified by both rising debt levels and high borrowing costs.
Domestic debt has expanded from ₦54.3 trillion in 2022 to ₦80.5 trillion, reflecting increased reliance on local borrowing.
External debt has also grown, rising from $41.6 billion to $46.9 billion, increasing foreign exchange exposure.
Meanwhile, the Central Bank of Nigeria’s prolonged tight monetary stance has pushed government borrowing rates above 20 per cent, significantly raising interest costs on new and refinanced debt.
Why it matters
These trends suggest Nigeria is becoming locked into a fiscal cycle where debt service grows faster than revenue, steadily crowding out capital investment and limiting the government’s ability to fund infrastructure, healthcare, education and other productivity-enhancing sectors.
Without meaningful improvements in revenue mobilisation or a sustained decline in borrowing costs, debt service is likely to remain the single largest claim on public finances throughout the Tinubu administration.
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