Onome Amuge
Successive budget overruns are turning Nigeria’s debt service projections into moving targets, exposing the growing strain within the federal government’s fiscal framework. Since 2023, actual debt payments have consistently exceeded official estimates, signalling that the cost of borrowing is rising faster than policymakers anticipated and steadily reshaping spending priorities.
Between 2023 and 2028, federal debt service is on track to exceed N91 trillion, based on a review of budget documents, the 2025 Appropriation Act and forward projections in the government’s Medium-Term Expenditure Framework. While headline figures point to N84.6 trillion in budgeted debt service over the six-year period, past experience indicates the final tally will be significantly higher as assumptions on interest costs and revenue repeatedly fall short.
The trend became clear in the first year of President Bola Tinubu’s administration. In 2023, the government allocated N6.56 trillion for debt service but ended the year having spent N8.56 trillion, overshooting the budget by roughly N2 trillion. Rather than stabilising, the gap widened in 2024. Budgeted debt service of N8.27 trillion ballooned to an actual outturn of N12.63 trillion, reflecting a combination of higher borrowing, rising interest rates and weaker-than-expected revenues.
This pattern has carried into 2025. Although the budget provided N14.32 trillion for debt service for the full year, actual payments reached N9.8 trillion by the end of the first seven months. That figure is already above the pro-rated benchmark implied by the budget, raising the likelihood of another year-end overshoot. Medium-term projections point at little relief ahead, with debt service expected to rise to N15.9 trillion in 2026 and N19.8 trillion in both 2027 and 2028.
For fiscal planners, the implications are significant. Debt service has become the most rigid component of expenditure, leaving limited flexibility elsewhere in the budget. Nowhere is this more visible than in capital spending, which has increasingly been squeezed as debt obligations take precedence.
Over the 2023–28 period, the government plans to spend N114.8 trillion on capital projects. In practice, however, actual releases have consistently lagged behind both budget intentions and debt service payments. In 2023, capital expenditure amounted to N6.3 trillion, well below the N8.56 trillion spent on servicing debt. The imbalance worsened in 2024, when debt service exceeded capital spending by N11.5 trillion.
Early figures for 2025 point to a similar outcome. Pro-rated capital expenditure for the first seven months stands at just N3.59 trillion, compared with a pro-rated budget expectation of N13.6 trillion. The shortfall reflects that infrastructure projects, already slowed by procurement delays and funding gaps, are once again bearing the brunt of fiscal pressure.
Economists warn that this persistent crowding-out effect carries long-term risks. Nigeria faces substantial deficits in transport, power, housing and social infrastructure, alongside pressing needs in healthcare and education. Underinvestment in these areas could weaken productivity growth, constrain job creation and ultimately undermine the revenue base required to stabilise public finances.
The roots of the problem lie in Nigeria’s weak and volatile revenue performance. Although 2023 offered a brief improvement, with actual revenues of N12.48 trillion slightly exceeding the budget, the momentum proved short-lived. In 2024, aggregate revenue fell to N20.98 trillion, nearly N5 trillion below target, forcing the government to rely more heavily on borrowing to fund its spending plans.
The outlook for 2025 is again under strain. Pro-rated actual revenue for the first seven months is estimated at N13.6 trillion, far below the N23.8 trillion implied by the budget. According to analysts, if this trend persists, the debt service-to-revenue ratio, a key indicator of fiscal sustainability closely watched by investors and credit rating agencies, is set to deteriorate further.
At the same time, the structure of public debt is amplifying servicing pressures. Domestic debt has expanded rapidly, rising from N54.3 trillion in 2022 to N80.5 trillion, as the government has leaned more heavily on local markets amid tighter global financial conditions. External debt has also increased, from $41.6 billion to $46.9 billion, adding foreign exchange exposure at a time when the naira has experienced sharp volatility.
Borrowing costs have risen alongside the debt stock. The Central Bank of Nigeria’s prolonged tightening cycle, aimed at curbing inflation and stabilising the currency, has pushed yields on government securities above 20 per cent in recent years. As maturing obligations are refinanced at higher rates, interest costs are feeding directly into the budget, compounding fiscal pressures.
Meanwhile, officials argue that recent reforms, including the removal of fuel subsidies and changes to the foreign exchange regime, will, over time, strengthen revenues and ease reliance on borrowing. Supporters of the administration say these measures are necessary to restore investor confidence and lay the groundwork for more sustainable growth.
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