The Federal Government plans to allocate a significant portion of its budget to debt servicing between 2025 and 2027, outpacing allocations for expenditure in infrastructure nd other capital projects. This is based on the recently approved 2025–2027 Medium-Term Expenditure Framework and Fiscal Strategy Paper, which projects debt servicing costs at N50.39 trillion for the three years, surpassing the N48.93 trillion earmarked for capital expenditures. Justifying the increase in debt servicing costs, the MTEF/FSP document said “The provision for debt service will increase significantly due to the size of the country’s debt and higher interest rate on borrowing following several adjustments of the MPR to 27.25% as of September 2024. We will rely on the Debt Management Office (DMO) to provide a debt service projection once we estimate the financing gap for the 2025 Budget.
“Efforts will be geared towards promoting a debt restructuring strategy to free up resources for increasing government spending on critical infrastructure with the decline in household and private sector spending. Non-commercial long-term facilities with tenors ranging between 10 and 50 years, with a significant moratorium of 5 to 7 years will be explored.”
For 2026, debt servicing will rise slightly by 0.9% to N15.52 trillion, while capital expenditure will dip by 3.28% to N15.94 trillion. The rising debt servicing costs, which are expected to grow by 26.7% from N15.38 trillion in 2025 to N19.49 trillion in 2027, pose concerns about fiscal sustainability. the FG spent N8.56 trillion on debt servicing in 2023, meaning the 2027 figure represents a staggering 127.7% increase in just four years. During this period, debt servicing will consume 34.06% of total annual expenditure, while capital expenditure growth remains sluggish, increasing by only 0.18% from N16.48 trillion in 2025 to N16.51 trillion in 2027. A closer examination of the fiscal projections shows that in 2025, capital expenditure will constitute 34.44% of the total budget, marginally higher than the 32.11% allocated to debt servicing.
However, by 2027, debt servicing is projected to rise to 37.2% of total expenditure, compared to 31.51% for capital projects. The figures reflect a troubling disparity: while debt servicing costs are increasing rapidly, capital investments remain constrained, potentially exacerbating Nigeria’s infrastructure deficit and hindering economic growth. By 2027, the gap widens significantly as debt servicing costs climb by 25.58% to N19.49 trillion, compared to a modest 3.58% increase in capital spending. This trend could derail Nigeria’s development goals and deepen its infrastructure challenges.
Nigeria to spend more on debt servicing than on investment in three years— MTEF/FSP document
