FG spends N5.28trn servicing domestic debt as interest costs hi

Nigeria spent N5.28 trillion servicing domestic debt in the first half of 2026, with interest and rental payments consuming N4.95 trillion, highlighting the growing fiscal cost of government borrowing and the resources required to meet competing spending needs.

Data from the Debt Management Office (DMO) show that interest and rental payments accounted for nearly 94 per cent of domestic debt service between January and June, while principal repayments on promissory notes added N333.96 billion.

The figures underline the pressure domestic debt obligations place on public finances as the Federal Government continues to borrow to fund infrastructure, public services and other budget commitments.

Federal Government bonds accounted for the largest share of interest payments at N3.35 trillion, while Nigerian Treasury Bills attracted N1.49 trillion. Together, the two instruments made up the bulk of the government’s domestic interest burden during the period.

Payments on Federal Government bonds fluctuated significantly, rising from N462.44 billion in January to N792.34 billion in March before falling to N332.49 billion in May and recovering to N525.05 billion in June.

Treasury Bill interest payments reached N1.49 trillion, with March recording the highest monthly payment for the instrument at N481.47 billion.

The government also paid N92.29 billion in rentals on Federal Government Sukuk, N8.90 billion in interest on Savings Bonds and N5.56 billion on green bonds.

March recorded the highest monthly domestic debt service at N1.43 trillion, followed by February at N967.67 billion. Payments fell to N567.16 billion in May before rising to N811.62 billion in June.

Principal repayments on promissory notes totalled N333.96 billion. Of this amount, N263.27 billion related to naira-denominated notes, while foreign-currency-denominated notes accounted for N70.69 billion. March and June recorded the largest repayments, at N154.23 billion and N136.96 billion respectively.

The scale of the interest bill raises questions about how much fiscal space remains for capital investment and other public spending. Although domestic borrowing provides the government with access to funding in naira, servicing the resulting obligations absorbs revenue that could otherwise support infrastructure, healthcare, education and economic development.

The cost also matters for the wider financial system. Government securities compete with private-sector lending for institutional funds, while attractive yields can encourage banks and other investors to favour sovereign instruments over riskier loans to businesses. The extent of this effect depends on market conditions, lending risks and the availability of alternative funding.

The latest figures add to the government’s broader debt-service burden. Nigeria incurred about N10.61 trillion in additional debt-service costs between June 2023 and December 2025, according to previously reported figures, exceeding the N6.47 trillion spent on strategic infrastructure development over the same period.

Total debt service rose to about N16 trillion in 2025, reflecting domestic interest costs and external obligations.

The central fiscal challenge is therefore not simply the amount Nigeria borrows, but the return generated by that borrowing. If debt-funded spending expands productive capacity, strengthens revenue generation and supports economic growth, it can improve the government’s ability to meet future obligations. Where borrowing mainly finances recurrent expenditure or projects with weak economic returns, rising interest payments can leave less room for development spending.

With domestic debt service already reaching N5.28 trillion in six months, improving revenue mobilisation and ensuring that borrowed funds deliver measurable economic returns will be critical to easing pressure on public finances.