BY FRONTLINE REPORTERS
Nigeria’s growing debt burden tightened its grip on public finances in 2025, with the Federal Government spending a staggering N12.63 trillion on debt-related obligations in the first nine months of the year—nearly N2 trillion above budget projections.
Fresh figures obtained by Frontline Reporters from the Budget Office of the Federation reveal that debt repayments exceeded the amended 2025 budget allocation by N1.90 trillion, raising fresh concerns about the sustainability of the country’s fiscal position and its ability to fund critical infrastructure projects.
According to the third-quarter Budget Implementation Report, total debt-related payments—including domestic debt service, foreign debt obligations and sinking fund contributions—reached N12.63 trillion between January and September, compared to a prorated budget estimate of N10.74 trillion.
The report showed that debt servicing alone accounted for N12.52 trillion, overshooting its budget allocation of N10.45 trillion by N2.07 trillion, representing an increase of nearly 20 percent.
A breakdown of the figures revealed that domestic debt servicing consumed N6.23 trillion, surpassing projections by N832.42 billion, while foreign debt repayments climbed to N6.30 trillion, exceeding budget estimates by N1.24 trillion.
The latest figures underscore the growing strain debt obligations are placing on government finances. Of the N18.63 trillion retained revenue generated by the Federal Government during the period, approximately 67 percent was spent servicing debts.
In practical terms, this means that for every N100 earned by the government, about N67 was used to pay creditors, leaving only N33 to cover salaries, infrastructure projects, social programmes, recurrent expenditure and other national obligations.
Even more concerning is the widening gap between debt repayments and capital investment.
While debt-related payments soared above N12 trillion, capital expenditure stood at only N3.10 trillion during the same period—less than one-fifth of the budgeted N17.58 trillion and more than four times lower than debt servicing costs.
The report also revealed a significant revenue shortfall. Total government revenue for the first three quarters reached N18.63 trillion, falling short of the projected N30.67 trillion by N12.03 trillion, or 39.24 percent.
In the third quarter alone, revenue generation stood at N7.70 trillion against a target of N10.22 trillion, reflecting a deficit of N2.52 trillion. The Budget Office attributed the shortfall primarily to weak oil revenues despite improved collections from non-oil sectors.
As debt obligations consumed a growing share of available resources, fiscal space remained severely constrained, limiting the government’s capacity to invest in roads, power, healthcare, education and other development priorities.
The report noted that although overall government expenditure of N24.66 trillion remained below the budgeted N41.24 trillion, debt servicing continued to receive priority over capital releases.
Nigeria’s fiscal deficit for the first nine months stood at N6.03 trillion, while total financing amounted to N12.07 trillion, driven largely by domestic borrowing and multilateral project loans.
Despite the mounting debt burden, the Federal Government is exploring options to refinance some of its expensive obligations and raise fresh funding to support development projects.
Speaking in an interview with Bloomberg Television, Finance Minister Taiwo Oyedele said improving market conditions and rising oil prices had created opportunities for the government to restructure costly debts and access new financing.
“We believe the timing is favourable for us to refinance some of our expensive debts and also secure additional funding for development,” Oyedele said.
The minister noted that higher crude oil prices, fuelled by geopolitical tensions in the Middle East, have strengthened investor confidence and improved Nigeria’s revenue outlook.
However, he acknowledged that the government still faces the challenge of financing an estimated N30 trillion budget deficit this year.
Economists have warned that Nigeria can no longer depend heavily on borrowing to drive development.
Chief Executive Officer of CSA Advisory, Dr. Aliyu Ilias, urged the government to pursue alternative revenue sources, including strategic asset sales, improved tax collection and greater utilisation of oil windfalls.
“The more you borrow, the more you spend on servicing debt. Government must begin to explore other sources of revenue if it wants to reduce this burden,” he said.
Similarly, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, blamed the country’s rising debt-servicing costs on high domestic interest rates and called for stronger collaboration between fiscal and monetary authorities.
Yusuf also advocated wider adoption of Public-Private Partnerships, arguing that private investors should take on a larger role in financing infrastructure projects currently funded through government borrowing.
He further urged the Federal Government to focus on core national priorities such as security, power, interstate highways and strategic infrastructure, while allowing states and private investors to shoulder greater responsibility for other sectors.
As debt repayments continue to outpace capital investments, analysts warn that Nigeria faces a critical fiscal challenge: balancing debt obligations with the urgent need to fund economic growth, infrastructure development and social services for its rapidly growing population.
ADVERTISEMENTS
