The Nigerian government’s recent expenditure report for the first eight months of 2024 has highlighted a concerning fiscal trend, with debt servicing consuming an overwhelming portion of the national budget. A total of N7.41tn was spent on servicing debts between January and August, surpassing the pro-rata budget of N5.51tn by 34.4%. This spending represents 89.6% of the total N8.27tn allocated for debt servicing this year, and it is expected that the final figure will exceed the budget, much like in 2023.

The increase in debt servicing is largely due to domestic debt obligations, which accounted for N5.03tn, exceeding the planned N3.92tn by 28.5%. In contrast, foreign debt servicing was aligned with projections, reaching N1.82tn. Meanwhile, capital expenditures have faced substantial underperformance, with only N3.65tn spent out of the N13.77tn allocated for capital projects in 2024, leaving a shortfall of N6.03tn. This underachievement is particularly stark in government-owned enterprises, which utilized just N95.31bn (82.6% below target).

The decline in capital expenditure, especially in sectors critical to infrastructure development, is raising alarms about Nigeria’s long-term economic sustainability. While the 2025-2027 Medium-Term Expenditure Framework shows some effort to address fiscal imbalances, the N50.39tn projected for debt servicing between 2025 and 2027 exceeds the N48.93tn allocated for capital expenditures during the same period, underlining the growing tension between servicing past debts and funding future growth.

Experts are warning that prioritizing debt repayment over investment in infrastructure could hamper development, leaving essential sectors underfunded. The government’s revenue base remains insufficient to keep up with the escalating cost of debt, further complicating efforts to balance fiscal discipline and economic growth. As debt servicing continues to rise, Nigeria faces a difficult challenge in managing its fiscal health while addressing the pressing needs of its economy.