The Federal Government has defended its debt position, saying claims that interest payments reached 124 per cent of revenue in the first half of 2026 present an incomplete picture of public finances.
In a statement issued on Sunday, October 18, by the Federal Ministry of Finance, it argued that the figure cited in the World Bank’s October 2026 Nigeria Development Update compares interest payments with an incomplete revenue base and does not reflect the government’s full-year debt position.
The ministry acknowledged that the first-half interest-to-revenue ratio stood at 124 per cent but said the calculation includes debt serviced by the Federal Government on behalf of other tiers of government, including external loans to states, while excluding some revenue earned by government agencies and enterprises but not yet remitted to the Treasury.
It argued that comparing these interest costs with federal revenue alone overstates the burden because the debt and revenue figures do not cover the same level of government.
It explained that revenue collection typically rises in the second half of the year because of the statutory timing of some tax payments, making a six-month comparison an incomplete measure of the government’s fiscal position.
“This is why the ratio stood at 156% in H1 2025, while the full-year 2025 debt-service-to-revenue ratio was below 60%, down from 97% before the reforms,” the ministry said.
It described the decline as evidence of progress from the current administration’s reforms.
Revenue grows faster than interest costs
The ministry also cited an improvement in the relationship between revenue and interest payments between the first half of 2025 and the corresponding period of 2026.
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According to the statement, federal revenue increased by 72 per cent, from ₦3.6 trillion to ₦6.2 trillion, while interest payments rose by 38 per cent, from ₦5.6 trillion to ₦7.7 trillion.
The ministry said the faster growth in revenue reduced the interest-to-revenue ratio by 32 percentage points, from 156 per cent in the first half of 2025 to 124 per cent in the first half of 2026.
It added that the gap between interest payments and revenue narrowed from ₦2 trillion to ₦1.5 trillion over the period.
“Revenue is therefore growing almost twice as fast as interest costs,” the ministry said, describing the trend as evidence that reforms were working rather than a sign of fiscal distress.
However, the figures provided by the ministry show that interest payments still exceeded federal revenue in the first half of 2026, leaving a ₦1.5 trillion gap between the two.
Ministry cites full-year debt outlook
The ministry also argued that debt sustainability should be assessed using full-year figures rather than a six-month snapshot.
It said the World Bank’s October 2026 report projected Nigeria’s full-year 2026 debt service, covering both interest and principal repayments, at 46 per cent of revenue.
The ministry described this as the more appropriate benchmark for assessing the country’s debt position.
The distinction is important because interest payments cover the cost of borrowing, while debt service includes both interest and principal repayments.
The ministry’s 124 per cent figure refers to interest payments relative to revenue in the first half of the year, whereas the 46 per cent projection covers total debt service for the full year.
It urged analysts and commentators to consider the period covered and the scope of the figures when assessing the government’s fiscal position.
Government defends borrowing process
The ministry also defended the legality of federal borrowing, saying all loans obtained by the government fall within limits approved by the National Assembly under the 2026 Appropriation Act and the approved borrowing plan.
It said borrowing complied with the Fiscal Responsibility Act 2007 and the Debt Management Office (Establishment) Act 2003, adding that borrowing information was published regularly by the Debt Management Office.
“The Ministry welcomes informed scrutiny of public finances,” the statement said, urging analysts to “compare like with like, read figures in context, and seek clarification where the data is unclear.”
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X