Nigeria’s mounting debt burden is increasingly squeezing government finances, with the Federal Government spending a staggering N3.14 trillion to service domestic debt in the first quarter of 2026, official figures from the Debt Management Office (DMO) have shown.

The latest figures reveal not only a substantial increase in debt-service costs but also a worrying pattern: the overwhelming majority of the money spent went towards interest payments rather than reducing the principal owed.

At N3.14 trillion, domestic debt service in the first quarter was 20.3 per cent higher than the N2.61 trillion recorded in the corresponding period of 2025.

Compared with the N2.28 trillion spent in the fourth quarter of 2025, the Q1 2026 figure represents an even sharper 37.5 per cent increase.

The development underscores the growing pressure debt obligations are placing on public finances at a time when the government is also required to fund infrastructure, security, social programmes and other recurrent commitments.

Interest, not debt reduction, dominates spending

An examination of the DMO data shows that N2.97 trillion, representing about 94.6 per cent of the N3.14 trillion domestic debt-service bill, went into interest payments.

Only N169.68 billion was used for principal repayments.

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In other words, for roughly every N100 the government spent servicing domestic debt during the quarter, about N95 went to interest, while just N5 went towards reducing the underlying debt.

The figures raise questions about the sustainability of a borrowing structure in which a significant portion of government resources is being consumed by the cost of servicing existing obligations.

Domestic debt-service payments increased from N741.82 billion in January to N967.67 billion in February, before surging to N1.43 trillion in March.

Interest payments followed a similar trajectory, rising from N726.38 billion in January to N967.67 billion in February and reaching N1.28 trillion in March.

The three-month interest bill consequently amounted to approximately N2.97 trillion.

Bonds and Treasury Bills drive interest burden

Federal Government bonds accounted for the largest component of interest payments during the quarter.

The DMO recorded approximately N1.96 trillion in interest payments associated with FGN bonds, including N1.90 trillion from FGN bonds and N61.97 billion from the FGN US Dollar Bond.

Nigerian Treasury Bills were another major source of the government’s interest burden, attracting N1.003 trillion during the quarter.

Treasury Bill interest payments stood at N262.57 billion in January, N258.90 billion in February and jumped to N481.47 billion in March.

FGN Savings Bonds accounted for another N4.24 billion in interest payments during the period.

The composition marks a significant change from the same period in 2025.

In Q1 2025, Treasury Bills generated N960.72 billion in interest payments, while FGN bonds accounted for N1.40 trillion, including N67.99 billion attributable to the FGN US Dollar Bond. Savings Bonds accounted for N2.72 billion.

By Q4 2025, Treasury Bill interest payments had declined to N742.34 billion, while FGN bonds accounted for N1.32 trillion. Savings Bonds attracted N3.99 billion, while FGN Sukuk and the Green Bond accounted for N101.02 billion and N5.59 billion respectively.

The subsequent increase in Treasury Bill and bond-related interest costs in Q1 2026 points to a renewed escalation in the cost of domestic borrowing.

Debt burden remains elevated

The rising cost of servicing domestic obligations comes against the backdrop of a persistently high public debt stock.

According to the DMO, Nigeria’s total public debt stood at N159.35 trillion as of March 31, 2026, compared with N159.28 trillion at the end of December 2025.

Although the quarterly increase was marginal, the longer-term trajectory is more striking.

Nigeria’s total public debt stood at N87.38 trillion as of June 30, 2023, shortly after President Bola Tinubu assumed office.

The subsequent increase has occurred alongside significant government borrowing and rising financing costs, placing debt management at the centre of debates over the country’s fiscal sustainability.

The principal problem

The Q1 figures highlight a critical feature of Nigeria’s debt challenge: the government is spending far more on servicing debt than on reducing the principal.

While borrowing can provide governments with resources to finance infrastructure and other productive investments, sustained increases in interest costs can restrict the funds available for other public priorities.

The latest data suggest that the immediate challenge is not simply the size of Nigeria’s debt stock, but the cost of maintaining that debt.

With nearly 95 per cent of domestic debt-service expenditure in Q1 2026 absorbed by interest payments, any further rise in borrowing costs or expansion of the debt stock could intensify pressure on government revenue.

The March surge to N1.43 trillion in monthly domestic debt service also provides a warning signal about the potential volatility of the government’s financing obligations.

For policymakers, the figures sharpen the need to balance new borrowing against revenue growth, economic expansion and the government’s capacity to meet existing obligations without crowding out essential spending.

The DMO data therefore tell a broader story than a quarterly increase in debt-service expenditure: Nigeria is devoting an increasingly substantial share of its resources to the financial cost of borrowing, while comparatively little is being used to reduce the principal itself.