FG faults World Bank’s 124% interest-to-revenue ratio over inclusion of states’ external loans

The Ministry of Finance says the World Bank’s recent analysis of the federal government’s interest payments includes debt serviced by the federal government on behalf of other tiers of government, including external loans to states.

The World Bank’s October 2026 Nigeria Development Update had said the federal government’s interest payments reached 124 percent of revenue in the first half (H1) of 2026.

In a statement on Sunday, the ministry said comparing the figure with federal revenue alone overstates the ratio, describing the figure as misleading.

“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% of revenue in the first half of 2026. This conclusion is misleading, for three reasons,” the statement reads.

The ministry said the World Bank report “compares mismatched figures against an incomplete revenue base”.

MINISTRY: WORLD BANK FIGURES INCLUDE STATES’ EXTERNAL LOANS

According to the statement, the interest figure includes debt serviced by the federal government on behalf of other tiers of government, including external loans to 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 ministry said.

“The reported revenue is also incomplete. It excludes independent revenue already earned by government agencies and enterprises but not yet remitted to the Treasury.

“In addition, more revenue is typically earned in the second half of the year than in the first due to the statutory timing of certain tax payments.

“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. This is a clear sign of the progress delivered by the current administration’s reforms.”

The ministry said even on the same calculation, the position has improved significantly.

“Between the first half of 2025 and the first half of 2026, federal revenue rose by 72%, from ₦3.6 trillion to ₦6.2 trillion. Interest payments rose by a much slower 38%, from ₦5.6 trillion to ₦7.7 trillion,” the ministry said.

“Revenue is therefore growing almost twice as fast as interest costs. As a result, the interest-to-revenue ratio fell by 32 percentage points in a single year, from 156% to 124%, and the gap between interest and revenue narrowed from ₦2.0 trillion to ₦1.5 trillion. This is the result of reforms working, not a sign of fiscal distress.”

The statement added that a half-year snapshot is not a measure of debt sustainability.

The ministry said debt sustainability should be assessed on a full-year basis rather than over six months, adding that the same World Bank report projects Nigeria’s full-year 2026 debt service, covering both interest and principal, at 46 percent of revenue.

According to the statement, this is the appropriate benchmark and a guide to avoiding invalid conclusions.

The ministry added that all borrowing is lawful and approved.

“Every naira borrowed by the Federal Government falls within the limits approved by the National Assembly under the 2026 Appropriation Act and the approved borrowing plan,” the statement reads.

“All borrowing is conducted in full compliance with the Fiscal Responsibility Act 2007 and the Debt Management Office (Establishment) Act 2003, and is published regularly by the Debt Management Office.”

The ministry welcomed informed scrutiny of public finances, adding that it encouraged analysts and commentators to apply the same rigour they seek “to hold the government to: compare like with like, read figures in context, and seek clarification where the data is unclear”.