The World Bank claimed in its October 2026 Nigeria Development Update that Nigeria's interest-to-revenue ratio reached 124 per cent in the first quarter of 2026, meaning debt servicing costs exceeded that period's government revenue. The finding has intensified debate over the sustainability of the country's growing debt burden and its impact on development spending.
The Ministry of Finance disputed the World Bank's figures on three grounds. The ministry said the report overstated the ratio by including State debts alongside federal obligations, failed to account for income earned by government agencies and enterprises not yet remitted to the treasury, and incorrectly treated payments that typically arrive in the second quarter of the year as part of first-quarter obligations. The World Bank maintained its concern about Nigeria's debt sustainability, citing its role as a global financial institution advising governments on economic matters.
Nigeria's public debt has grown significantly in recent years. When President Bola Tinubu took office in May 2023, total public debt stood between US$108.29 billion and US$113.42 billion, depending on exchange rates and reporting dates. During Tinubu's first three years in office, total public debt reached approximately US$120.9 billion, with external debt rising by US$11.4 billion during this period. This contrasts sharply with earlier periods: when President Olusegun Obasanjo left office in 2007, external debt was US$2.11 billion with domestic debt at N2.17 trillion, but by the end of President Goodluck Jonathan's tenure in 2015, external debt had risen to between US$63.7 billion and US$63.8 billion.
The debt burden is constraining government finances across tiers. State governments rejected Paris Club loan repayment deductions from their federal allocations during the September 2026 revenue sharing cycle, arguing that the deductions would squeeze their finances and prevent them from meeting obligations. The states cited N240 billion in savings that they said should be shared among the three tiers of government rather than retained under a federal government arrangement.
The authors warn that rising debt servicing threatens economic development. They argue that debt repayment difficulties have historically coincided with inability to pay public sector salaries and difficulties implementing budgets, both of which stall economic growth by reducing production, employment, income generation and causing rising poverty. The columnists call for a proper audit of the country's debt profile made public in the spirit of transparency and accountability, and urge federal and state governments to align spending with economic realities rather than comparing budgets to wealthier African nations.
For savers and borrowers in Nigeria, rising public debt servicing costs mean less government funding for development projects and potential pressure on currency stability and interest rates.