Nigeria’s Federal Government has challenged the World Bank’s assessment of its debt burden, arguing that ₦7.7tn in interest payments in the first half of 2026 does not accurately reflect the country’s debt sustainability when measured against federal revenue alone.
The Federal Ministry of Finance said the reported interest-to-revenue ratio of 124 per cent was misleading because it included debt obligations serviced on behalf of state governments, excluded some government revenue and relied on a six-month fiscal snapshot.
The ministry’s position followed the World Bank’s October 2026 Nigeria Development Update, which reported Federal Government revenue of ₦6.2tn and interest payments of ₦7.7tn for the first half of the year.
An analysis of the figures published by The PUNCH showed that interest payments represented approximately 124.2 per cent of revenue, exceeding the government’s reported revenue by ₦1.5tn.
In a statement issued on Sunday and shared on X by the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, the ministry disputed the interpretation of the figures, insisting that the calculation did not provide a complete picture of the government’s fiscal position.
“The Federal Ministry of Finance has noted recent analysis and public commentary which, citing the World Bank’s October 2026 Nigeria Development Update, claims that Federal Government interest payments reached 124 per cent of revenue in the first half of 2026. This conclusion is misleading, for three reasons,” the ministry said.
The disagreement highlights a central issue in Nigeria’s fiscal outlook: whether rising revenue is sufficient to reduce the burden of debt servicing and create more room for public investment.
FG says revenue growth outpaced interest payments
The Finance Ministry argued that the reported ratio compared debt obligations covering more than one tier of government with revenue attributed exclusively to the Federal Government.
According to the ministry, the interest-payment figure included debt serviced by the Federal Government on behalf of other tiers of government, including external loans obtained by states.
“Measuring this against federal revenue alone overstates the ratio, which is only meaningful when debt and revenue cover the same level of government,” the statement said.
The ministry also maintained that the revenue figure excluded income earned by government agencies and enterprises but not yet remitted to the Treasury.
It further argued that statutory collection schedules meant some taxes were predominantly collected in the second half of the year, making first-half revenue an incomplete basis for evaluating annual debt obligations.
To support its position, the ministry said the interest-to-revenue ratio declined from 156 per cent in the first half of 2025 to approximately 124 per cent in the corresponding period of 2026.
It said Federal Government revenue increased by 72 per cent, from ₦3.6tn to ₦6.2tn, while interest payments rose by 38 per cent, from ₦5.6tn to ₦7.7tn.
The ministry added that the gap between interest payments and revenue narrowed from ₦2tn in the first half of 2025 to ₦1.5tn in the first half of 2026.
“This is the result of reforms working, not a sign of fiscal distress,” it declared.
The government also cited a full-year debt-service-to-revenue ratio below 60 per cent, compared with 97 per cent before the current administration’s reforms, as evidence of improving fiscal management.
However, the ministry did not provide revised first-half revenue and interest-payment figures or an alternative calculation demonstrating the precise effect of the adjustments it proposed.
World Bank’s full-year projection
The ministry also questioned the use of six-month figures as a definitive measure of debt sustainability, arguing that full-year projections offer a more comprehensive assessment.
It cited the World Bank’s projection that Nigeria’s full-year 2026 debt service, covering both interest and principal repayments, would amount to 46 per cent of revenue.
The ministry described that projection as a more appropriate benchmark for assessing the country’s fiscal position.
However, the full-year debt-service ratio and the first-half interest-to-revenue ratio measure different things. The former includes principal repayments and interest over an entire year, while the latter compares interest payments with revenue during six months.
The two measures therefore provide different perspectives on the government’s fiscal obligations and should not be treated as directly interchangeable.
The Finance Ministry also defended the government’s borrowing programme, saying loans secured by the current administration had received the necessary legal and legislative approvals.
It maintained that borrowing complied with the limits authorised by the National Assembly under the 2026 Appropriation Act and the approved borrowing plan.
The ministry further cited compliance with the Fiscal Responsibility Act 2007 and the Debt Management Office (Establishment) Act 2003, adding that details of Nigeria’s debt obligations were regularly published by the Debt Management Office.
The broader fiscal question remains whether revenue growth can consistently outpace debt-service costs and free up funds for infrastructure, healthcare, education and other public priorities.
$1.25bn World Bank loan principal repayments begin in 2031
While the government disputes the interpretation of its interest bill, financing agreements for a separate $1.25bn World Bank facility show that Nigeria will begin repaying the principal in December 2031, with the final instalment on the longer-dated loan scheduled for June 2060.
The financing was approved under the Nigeria Actions for Investment and Jobs Acceleration Development Policy Financing programme, designed to support reforms aimed at expanding access to credit, improving electricity supply, strengthening trade competitiveness and increasing government revenue.
The facility comprises a $750m concessional credit from the International Development Association (IDA) and a $500m loan from the International Bank for Reconstruction and Development (IBRD), both members of the World Bank Group.
The financing is intended to support Nigeria’s efforts to strengthen the foundations for economic growth, improve the business environment and stimulate job creation.
The World Bank has identified reforms involving capital markets, digital regulation, electricity, trade liberalisation, agricultural inputs and domestic revenue mobilisation as key components of the programme.
The $1.25bn facility was the second-largest single World Bank financing operation secured by Nigeria under President Bola Tinubu, following the $1.5bn Reforms for Economic Stabilisation to Enable Transformation Development Policy Financing approved in June 2024.
Different repayment schedules
Under the agreements, principal repayments on both facilities are scheduled to begin on December 15, 2031, but the loans have different maturity dates.
The $750m IDA credit is scheduled to be fully repaid by June 15, 2051, while the $500m IBRD loan runs until June 15, 2060.
For the IDA credit, Nigeria is required to repay 2.5 per cent of the principal every six months, equivalent to $18.75m per instalment or $37.5m annually during full repayment years.
The IBRD facility provides for semi-annual principal instalments of 1.72 per cent from December 2031 through December 2059, followed by a final instalment of 1.96 per cent in June 2060.
The regular IBRD instalments amount to approximately $8.6m every six months, while the final principal payment is about $9.8m.
Combined, the facilities will require principal repayments of approximately $27.35m every six months between December 2031 and June 2051, equivalent to $54.7m annually during full repayment years.
These amounts cover principal only and exclude interest and other applicable charges. The total cost of borrowing will depend on the rates applied throughout the repayment period and the contractual terms governing each facility.
The IDA provides concessional financing to eligible lower-income countries on more favourable terms, while the IBRD primarily lends to middle-income and creditworthy lower-income countries on market-linked terms.
Under the IBRD agreement, the interest rate is determined by a reference rate plus a variable spread. The IDA credit’s interest charge is calculated using the reference rate plus a variable spread, less 250 basis points, subject to applicable contractual provisions.
The IBRD facility also attracts a front-end fee of 0.25 per cent, equivalent to $1.25m, and an annual commitment charge of 0.25 per cent on the undisbursed balance.
For the IDA credit, the agreement provides for a maximum annual commitment charge of 0.5 per cent on the undisbursed financing balance.
The agreements do not establish a fixed dollar amount for total interest payments over the life of the loans.
Disbursement tied to reform implementation
The financing arrangements make disbursement conditional on satisfactory implementation of agreed reforms and the maintenance of an adequate macroeconomic policy framework.
The $750m IDA credit is structured for disbursement in a single tranche, subject to the World Bank’s assessment of Nigeria’s economic policies and fulfilment of the applicable conditions.
The $500m IBRD facility is divided into two withdrawal tranches of $249.375m each, with the remaining $1.25m allocated to the front-end fee.
Release of the second tranche depends on satisfactory progress in implementing the programme, maintaining an adequate macroeconomic framework and completing agreed policy actions.
Under the IBRD agreement, the bank may cancel some or all of the undisbursed balance if the government fails to take satisfactory corrective measures within 90 days of receiving notice.
Both agreements have a closing date of December 31, 2027.
The reform programme covers two broad areas: improving access to financial credit, digital services and electricity, and strengthening competitiveness through trade, taxation and agricultural reforms.
The measures recognised in the agreements include the Investment and Securities Act 2025, the National Integrated Electricity Policy, electricity metering reforms and regulations intended to facilitate private investment in interconnected mini-grids.
The programme also covers trade reforms under the African Continental Free Trade Area, including the gradual liberalisation of 90 per cent of tariffs on goods from African countries over 10 years.
Other measures include removing import bans on specified essential food products and inputs, reducing import adjustment taxes on selected commodities by at least 25 per cent in 2026, and progressively eliminating applicable adjustment taxes between 2027 and 2036.
Tax reforms recognised in the agreements include mandatory electronic invoicing for Value Added Tax, a 15 per cent minimum effective tax rate for large companies and multinational enterprises, and an increase in the maximum personal income tax rate from 24 per cent to 25 per cent.
Accountability and reporting requirements
The agreements also impose financial reporting and accountability requirements on the Nigerian government.
Nigeria is required to maintain dedicated dollar accounts for receiving the proceeds and ensure that equivalent amounts are reflected in its budget management system.
The Federal Ministry of Finance must report the amounts received, relevant account details and records of transactions to the World Bank within 30 days of each withdrawal.
The agreements further require the accounts to be audited by auditors of the Central Bank of Nigeria acceptable to the World Bank. Certified audit reports must be submitted within four months of withdrawal and made publicly available.
These conditions are intended to strengthen transparency and ensure that the financing supports the agreed economic reform programme.
Debt sustainability remains a key fiscal test
The disagreement over the World Bank’s interest-payment figures comes as Nigeria continues to rely on revenue-enhancing reforms and external financing to support its economic programme.
For investors and credit analysts, the central issue is not simply the size of the government’s interest bill, but how quickly revenue can grow relative to debt obligations and whether borrowing translates into stronger productive capacity.
The Finance Ministry’s figures point to faster revenue growth than interest-payment growth in the first half of 2026. The World Bank’s assessment, meanwhile, has renewed attention on the pressure that debt servicing places on public finances.
Resolving the disagreement will require transparent, comparable figures covering the same tiers of government and accounting periods, alongside clear disclosures of interest payments, principal repayments and total revenue.
Ultimately, Nigeria’s debt sustainability will depend on whether the government can sustain revenue growth, manage borrowing costs and meet repayment obligations without squeezing essential public spending or undermining investment in economic growth.