Nigeria’s Debt Servicing Swallows 72% of Revenue as Analysts Warn of Fiscal Sustainability Risks

Nigeria’s growing debt burden is raising fresh concerns among economic analysts after debt servicing costs consumed nearly 72 per cent of federally generated revenue in the first nine months of 2025. Despite efforts to improve revenue collection through stronger tax administration and increased oil earnings, experts say the country’s fiscal position remains under significant pressure as rising borrowing costs continue to outpace revenue growth.

A review of the Federal Government’s amended 2025 budget by Cowry Asset Management revealed that actual revenue stood at N17.1 trillion by the end of September, far below the projected N37.35 trillion target for the period. This represents a performance rate of just 45.8 per cent, leaving a massive shortfall of over N20 trillion. While government earnings have shown gradual improvement, analysts noted that the gains are being overshadowed by rapidly increasing debt obligations.

According to the report, total debt service payments climbed to N12.3 trillion during the review period, exceeding the budget benchmark by almost 18 per cent. The sharp increase was largely driven by domestic debt servicing, with interest payments soaring to N9.3 trillion against a projected N5.4 trillion. Analysts attributed the surge to persistently high interest rates and the elevated Monetary Policy Rate, which have significantly increased the cost of refinancing government securities.

The report also highlighted the government’s poor capital budget implementation, describing it as a major challenge to economic growth. Out of an expected capital expenditure benchmark of N17.5 trillion, only N1.3 trillion had been released, representing a meagre execution rate of 7.3 per cent. Funding for Ministries, Departments and Agencies also fell substantially below expectations, while several project financing programmes, including multilateral loans and external borrowing arrangements, recorded no disbursements due to administrative and implementation delays.

Analysts warned that continued underinvestment in infrastructure could weaken Nigeria’s medium-term growth prospects by limiting productivity, discouraging private investment and increasing business costs. Looking ahead, they identified dependence on crude oil revenue, high domestic borrowing costs, inflationary pressures and delays in accessing development financing as key threats to fiscal performance. Without stronger non-oil revenue mobilisation and improved budget execution, they cautioned that the 2025 budget may ultimately be remembered not for its record size, but for its limited impact on the real economy.

source: Leadership