NIGERIA’s fiscal pressures are intensifying as debt servicing continues to consume a significant portion of the Federal Government’s resources, with payments exceeding capital expenditure by about ₦3.9 trillion over the past two years.
A media brief obtained by News Point Nigeria on Sunday from the Federal Ministry of Finance revealed that the Federal Government spent a total of ₦27.2 trillion servicing public debt between 2024 and 2025, underscoring the growing burden of debt obligations on the nation’s finances.
The document, prepared by the Special Adviser to the Minister of Finance and Coordinating Minister of the Economy on Media and Communications, Dr Ogho Okiti, explained that the surge in debt servicing costs was largely driven by macroeconomic factors, particularly the depreciation of the naira and higher domestic interest rates.
According to the data contained in the brief, the Federal Government spent ₦12.63 trillion on debt servicing in 2024. This figure significantly exceeded the ₦8.56 trillion originally provided for in the national budget for that year.
Debt service payments increased further in 2025, rising to ₦14.57 trillion, which was also above the ₦13.12 trillion allocated for the purpose in the budget.
Combined, the two-year figures indicate that Nigeria spent about ₦27.2 trillion servicing debt obligations during the period, reflecting mounting fiscal pressure as interest costs and exchange rate adjustments continue to rise.
A year-on-year comparison shows that debt servicing increased by ₦1.94 trillion between 2024 and 2025, representing a 15.4 per cent rise.
The report also revealed that actual spending on debt servicing exceeded budget projections in both years under review.
In 2024, debt servicing overshot the approved budget by about ₦4.07 trillion as payments reached ₦12.63 trillion compared with the ₦8.56 trillion originally approved.
Although the gap narrowed slightly in 2025, it remained significant, with actual spending of ₦14.57 trillion exceeding the budgeted ₦13.12 trillion by about ₦1.45 trillion.
Overall, the Federal Government exceeded its debt servicing budget by approximately ₦5.52 trillion across the two years.
According to the finance ministry, the rise in debt servicing costs was largely due to macroeconomic conditions rather than fresh borrowing.
The document explained that movements in the exchange rate significantly increased the naira value of Nigeria’s external debt obligations.
“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 brief stated.
The report also linked rising debt service costs to higher domestic interest rates following tighter monetary policy aimed at stabilising inflation and the exchange rate.
It noted that interest rates increased after the Central Bank of Nigeria tightened monetary policy, thereby raising the cost of servicing domestic debt instruments.
Further analysis of government finances showed that debt servicing absorbed a substantial share of federal revenue during the period.
According to the brief, Federal Government revenue rose from ₦12.48 trillion in 2023 to ₦20.98 trillion in 2024 due to improved tax administration, stronger remittance discipline and increased non-oil revenue.
However, with debt servicing reaching ₦12.63 trillion in 2024, about 60 per cent of the government’s revenue was spent on debt obligations that year.
By November 2025, federal revenue had climbed to ₦22 trillion, while debt service payments stood at ₦14.57 trillion, meaning nearly two-thirds of the government’s income went toward servicing debt.
The data showed that the debt service-to-revenue ratio increased from about 60 per cent in 2024 to roughly 66 per cent by November 2025.
Despite the mounting debt burden, the Federal Government maintained relatively high levels of capital spending during the same period.
Total capital expenditure stood at ₦11.59 trillion in 2024, representing an 84 per cent budget performance rate. By November 2025, about ₦11.7 trillion had been spent on capital projects, representing a 76 per cent performance rate.
However, the data also showed that debt servicing continued to exceed capital expenditure in both years.
In 2024, the ₦12.63 trillion spent on servicing debt exceeded capital spending by about ₦1.04 trillion.
The gap widened further in 2025, as debt service payments of ₦14.57 trillion exceeded capital expenditure of ₦11.7 trillion by roughly ₦2.87 trillion.
Across the two years combined, debt servicing surpassed capital spending by approximately ₦3.91 trillion.
The ministry also clarified that perceptions that capital projects were not being implemented were inaccurate.
It explained that federal capital expenditure includes both direct budgetary releases to ministries, departments and agencies as well as project-tied loans from development partners.
According to the document, many multilateral and project-tied loans are disbursed directly by development partners and are tied to specific infrastructure and social development projects.
“These projects proceed even when MDA cash releases are limited,” the document stated.
The brief also highlighted broader fiscal reforms undertaken by the Federal Government 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.
According to the ministry, these overdrafts had accumulated to about ₦30 trillion and were previously not transparently reflected in the fiscal deficit framework.
The report explained that the advances have now been securitised and formally recognised within the public debt framework in order to improve transparency in fiscal reporting.
It added that government deficits are now financed through structured borrowing instruments subject to legislative oversight rather than through monetary financing.
The ministry acknowledged that the transition has tightened fiscal space in the short term but argued that it is intended to restore macroeconomic credibility and strengthen long-term fiscal sustainability.
Addressing concerns about Nigeria’s rising debt stock, the ministry explained that a significant portion of the increase in nominal debt figures reflects accounting adjustments and exchange rate movements rather than fresh borrowing.
It noted that about ₦30 trillion in Ways and Means advances had now been formally recognised within the debt framework, while exchange rate adjustments significantly increased the naira value of external debt.
According to the document, about ₦70 trillion of the nominal increase in Nigeria’s public debt can be attributed to exchange rate valuation effects.
The ministry added that debt sustainability should be assessed using broader indicators such as the debt-to-GDP ratio, the debt service-to-revenue ratio, fiscal deficit trends and revenue growth, rather than focusing solely on the total nominal debt figure.
The brief also pointed to oil revenue shortfalls as another major challenge affecting government finances.
In 2025, projected oil and gas federation revenue was ₦37.4 trillion, but actual inflows were only about ₦7 trillion, representing just 19 per cent performance.
According to the document, if the projections had been realised, the Federal Government could have received roughly ₦15 trillion more in revenue.
It also noted that oil revenues have a higher proportional allocation to the Federal Government compared with other revenue sources, meaning shortfalls have a more significant impact on federal finances than on states and local governments.
The ministry concluded that Nigeria’s fiscal challenges reflect a broader transition from what it described as hidden deficits and monetary financing toward a more transparent and market-based fiscal framework.
“The administration has chosen long-term sustainability over short-term illusion,” the document stated.