Federal Govt Spends 44% Of Customs, VAT, CIT Revenue On Domestic Debt Service

The federal government spent N3.14 trillion servicing domestic debt in the first quarter of 2026, representing about 44 per cent of the N7.14 trillion generated from Customs duties, Value Added Tax (VAT) and Company Income Tax (CIT) during the period.

The development underscored the growing pressure of debt obligations on government finances, as a significant portion of revenue from three major non-oil sources was absorbed by domestic debt servicing within the first three months of the year.

Data from the Debt Management Office (DMO), the National Bureau of Statistics (NBS), and the Nigeria Customs Service (NCS) showed that Customs, VAT, and CIT generated a combined N7.14 trillion in Q1 2026, while the Federal Government’s domestic debt service stood at N3.14 trillion.

The figures indicate that for every N100 generated from the three revenue sources, approximately N44 went into servicing domestic debt.

Nigeria’s total public debt stood at N159.35 trillion as of March 31, 2026, according to the DMO. Of the total debt stock of N71.95 trillion, 45.15 per cent was external debt, while domestic debt accounted for N87.40 trillion, or 54.85 per cent.

The DMO’s actual domestic debt service report showed that the Federal Government spent N741.82 billion in January, N967.67 billion in February and N1.43 trillion in March, bringing total domestic debt servicing to N3.14 trillion during the quarter.

Interest payments accounted for the bulk of the expenditure, at N2.97 trillion, while principal repayments stood at N169.68 billion.

A breakdown of the interest payments showed that N1.003 trillion was spent on Nigerian Treasury Bills, while interest on Federal Government of Nigeria (FGN) bonds amounted to N1.962 trillion. Interest payments on FGN Savings Bonds added N4.24 billion.

March recorded the highest domestic debt service during the quarter at N1.43 trillion, comprising N1.28 trillion in interest payments and N154.23 billion in principal repayments.

The high debt-service burden comes as the federal government continues to intensify efforts to boost non-oil revenue, expand the tax base and improve revenue collection.

Meanwhile, the Nigeria Customs Service generated N3.35 trillion in the first quarter of 2026, representing 30.25 per cent of its approved N11.074 trillion revenue target for the year.

The figure leaves the Service with N7.724 trillion to generate before the end of the fiscal year.

The Comptroller-General of Customs, Dr Wale Adeniyi, attributed the revenue performance to reforms and modernisation initiatives implemented by the Service, cautioning against attributing the growth solely to economic conditions or exchange rate movements.

He said the improvement was largely driven by structural reforms and better systems within the Service.

“These are not the figures of an administration in difficulty. But I want to be careful about what those numbers prove.

“Revenue growth in a period of currency adjustment can flatter an administration that has done very little. What matters is whether the growth rests on better systems or on favourable arithmetic.

“I put it to you that ours rests on systems, and the purpose of this retreat is to let you examine that claim rather than accept it from me,” he said.

The NBS reported that Nigeria generated N2.42 trillion from VAT in Q1 2026, representing a 9.98 per cent increase from the N2.20 trillion recorded in Q4 2025.

Year-on-year, VAT revenue rose by 17.06 per cent from N2.06 trillion recorded in Q1 2025.

Of the N2.42 trillion VAT revenue generated during the quarter, local VAT payments accounted for N1.11 trillion, foreign VAT payments contributed N830.47 billion, while import VAT stood at N477.55 billion.

Company Income Tax, however, recorded a decline during the period, with NBS data showing that CIT revenue fell to N1.37 trillion in Q1 2026.

The figure represented an 8.08 per cent decline from N1.49 trillion recorded in Q4 2025 and a sharper 31.05 per cent decrease from N2.06 trillion generated in Q1 2025.

Domestic CIT contributed N538.91 billion, while foreign CIT accounted for N828.82 billion.

The combined N7.14 trillion generated from Customs, VAT and CIT compares with N3.14 trillion spent on domestic debt servicing during the quarter, highlighting the extent to which debt obligations are competing with other government spending needs.

Beyond domestic debt obligations, the Federal Government also serviced its external debt during the quarter, with total external debt service standing at $954.06 million between January and March 2026.

The external debt service comprised $308.33 million in principal repayments, $623.22 million in interest payments and $22.50 million in other charges.

The debt-service figures are likely to remain a key indicator of the federal government’s fiscal position as it seeks to increase revenue mobilisation, reduce dependence on borrowing and create greater fiscal space for infrastructure and other public expenditure.