By Staff Reporter
The Federal Government has challenged reports suggesting that its interest payments consumed 124 per cent of its revenue in the first half of 2026, insisting that the figure presents an incomplete picture of Nigeria’s public finances, even as fresh World Bank data reveals rising debt costs and a sharp decline in capital expenditure.
The Federal Ministry of Finance, in a press release dated October 18, 2026, argued that the reported interest-to-revenue ratio was misleading because it compared debt obligations with an incomplete revenue base and failed to account adequately for the timing of government receipts.
However, figures contained in the World Bank’s October 2026 Nigeria Development Update, titled Beyond the Federal Purse: How Higher Revenues Shaped State Priorities, show that the Federal Government spent approximately ₦7.7 trillion on interest payments between January and June 2026, against reported revenue of ₦6.2 trillion.
The development has renewed debate over whether Nigeria’s economic reforms are generating sufficient fiscal space to meet debt obligations while funding infrastructure and essential public services.
FG Explains Why 124% Debt Interest Figure Is Misleading
In its statement, the Ministry of Finance identified three major reasons why the reported 124 per cent figure should not be interpreted as a complete measure of the country’s debt sustainability.
First, the ministry argued that the interest-payment figure included debt serviced by the Federal Government on behalf of other tiers of government, including external loans to state governments.
According to the ministry, comparing these obligations exclusively against federal revenue could overstate the ratio because the debt and revenue figures do not necessarily cover the same level of government.
The ministry also argued that the reported revenue figure excluded some independent revenue already earned by government agencies and enterprises but not yet remitted to the Treasury.
It further noted that certain tax payments are concentrated in the second half of the year, meaning that revenue collection is not evenly distributed across the 12 months.
The ministry cited the first-half 2025 ratio of 156 per cent, compared with a full-year 2025 debt-service-to-revenue ratio of below 60 per cent, which it said demonstrated the importance of assessing the figures over a complete fiscal year.
However, the ministry’s explanation does not, by itself, establish that the World Bank’s calculation is incorrect. A detailed reconciliation of the revenue and debt figures would be needed to determine the precise effect of the adjustments it identified.
World Bank Data Shows ₦7.7trn Interest Payments Against ₦6.2trn Revenue
According to the World Bank figures reported by Nigerian media, the Federal Government’s interest payments increased from ₦5.6 trillion in the first half of 2025 to ₦7.7 trillion in the corresponding period of 2026.
This represents an increase of approximately 37.5 per cent.
Over the same period, federal revenue rose from ₦3.6 trillion to ₦6.2 trillion, representing growth of approximately 72.2 per cent.
Consequently, the interest-to-revenue ratio declined from approximately 155.6 per cent to 124.2 per cent.
The figures indicate that although revenue grew considerably faster than interest costs, the government’s reported interest payments still exceeded its revenue by approximately ₦1.5 trillion during the six-month period.
In practical terms, for every ₦100 collected in reported federal revenue, approximately ₦124 was required to cover interest payments alone.
The figures exclude the additional resources required to finance other government responsibilities, including salaries, public services, infrastructure and other expenditure.
The World Bank attributed the increase in interest costs partly to high domestic borrowing costs.
Revenue Growth Gives FG Some Relief, But Debt Pressure Remains
The Ministry of Finance maintained that the reduction in the interest-to-revenue ratio demonstrated progress under the administration’s economic reforms.
Its argument is supported by the reported growth in revenue, which significantly outpaced the increase in interest payments between the first halves of 2025 and 2026.
Nevertheless, the rise in the absolute amount paid as interest remains a major fiscal concern.
Interest payments increased by approximately ₦2.1 trillion within one year, while the reported revenue-interest gap narrowed from ₦2 trillion to ₦1.5 trillion.
This means that the government has improved its revenue position relative to interest costs but continues to face considerable pressure from existing debt obligations.
The distinction is important because an improving ratio does not necessarily mean that the government has enough resources to fund all its spending priorities without additional borrowing.
Capital Expenditure Falls to ₦700bn
One of the most striking findings in the World Bank’s reported figures is the sharp decline in federal capital expenditure.
Reported capital spending fell from approximately ₦2.3 trillion in the first half of 2025 to ₦700 billion in the first half of 2026.
As a share of gross domestic product, capital expenditure declined from approximately one per cent to 0.3 per cent.
By comparison, interest payments rose from 2.5 per cent to 3.1 per cent of GDP.
The figures suggest a growing imbalance between the cost of servicing existing debt and the resources recorded for capital projects.
Capital expenditure typically finances infrastructure and development projects, including roads, bridges, public buildings and other government assets.
Although the figures alone do not establish that rising interest costs caused the decline in capital spending, they raise questions about the government’s ability to maintain adequate investment while meeting its financial obligations.
The challenge is particularly significant for a country that needs substantial investment in electricity, transportation, healthcare, education and other public infrastructure.
World Bank Reports 4.2% Economic Growth
Despite the fiscal concerns, the World Bank’s October 2026 update also contains positive economic indicators.
The bank reported that Nigeria’s economy grew by 4.2 per cent in the first half of 2026, compared with 3.9 per cent in the corresponding period of 2025 and 3.5 per cent in 2024.
It also highlighted improvements in revenue mobilisation and the fiscal position of state governments.
The findings suggest that the economy has recorded progress in some areas, even as the Federal Government continues to face challenges involving debt costs and expenditure priorities.
However, economic growth and increased government revenue do not automatically translate into improved living standards for ordinary Nigerians.
The ultimate test is whether the gains generate employment, improve household purchasing power, strengthen public services and reduce poverty.
FG Insists Borrowing Is Lawful
In its October 18 statement, the Ministry of Finance also rejected any suggestion that the government’s borrowing practices were outside the law.
The ministry said all Federal Government borrowing falls within limits approved by the National Assembly under the 2026 Appropriation Act and the approved borrowing plan.
It added that borrowing activities comply with the Fiscal Responsibility Act 2007 and the Debt Management Office (Establishment) Act 2003.
The ministry further stated that borrowing information is published regularly by the Debt Management Office.
It called on analysts and commentators to compare like with like, interpret figures within their proper context and seek clarification where the data is unclear.
The statement was issued in response to public commentary drawing attention to the World Bank’s reported first-half interest-to-revenue ratio.
What the Figures Mean for Ordinary Nigerians
The debate has implications beyond government accounting.
When interest payments absorb a substantial share of available revenue, the government faces difficult decisions about financing infrastructure, public services and development programmes.
For ordinary Nigerians, the key questions are whether the government can sustain spending on roads, hospitals and schools, support economic activity and improve public services while managing its existing debt.
The decline in reported capital expenditure makes these questions particularly important.
However, the available figures do not establish that every reduction in government investment was caused by debt servicing. Budget implementation, payment schedules and other fiscal factors may also influence capital spending.
Similarly, increased revenue could strengthen the government’s capacity to deliver public services if the additional resources are managed effectively.
The Verdict: Who Is Right, FG or the World Bank?
The figures presented by the two sides highlight different aspects of Nigeria’s public finances.
The Ministry of Finance is right to argue that a six-month interest-to-revenue ratio should not be treated as the sole measure of debt sustainability. Differences in the coverage of debt obligations, the timing of revenue collection and the treatment of government agency receipts can affect the interpretation.
The World Bank’s reported figures, however, highlight a genuine fiscal challenge: interest payments of ₦7.7 trillion exceeded reported federal revenue of ₦6.2 trillion in the first half of 2026, while capital expenditure fell sharply.
The ministry’s claim that the 124 per cent ratio is misleading would be stronger if accompanied by a detailed reconciliation showing how the inclusion of other government obligations and additional revenue receipts changes the calculation.
Ultimately, the decline in the ratio from approximately 156 per cent to 124 per cent represents an improvement, but it does not eliminate the need to manage the absolute cost of borrowing and protect essential development spending.
For Nigeria, the challenge is to convert higher revenue and economic growth into sustainable public finances, stronger infrastructure and tangible improvements in citizens’ living standards.