Nigeria’s public finances came under intense pressure in the first seven months of 2025as the Federal Government spent nearly three-quarters of its total revenue servicing debts, underscoring the growing burden of the country’s debt obligations amid weakening oil earnings.
An analysis of the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) released by the Budget Office of the Federation shows that between January and July 2025, the Federal Government generated total revenue of N13.67 trillion. Of this amount, a staggering N9.81 trillion was channelled into servicing domestic and external debts, meaning debt service alone absorbed 71.8 per cent of government income during the period.
The strain on public finances became even more pronounced when personnel costs were factored in. Spending on salaries and wages for ministries, departments and agencies (MDAs), as well as government-owned enterprises, stood at N4.51 trillion. Combined with debt servicing, total expenditure on debt and personnel costs rose to N14.32 trillion—exceeding total revenue by about N650 billion. In effect, debt service and salaries alone accounted for roughly 105 per cent of Federal Government income in the first seven months of the year.
Oil Revenue Collapse Drives Shortfall
According to the Budget Office, the widening revenue gap was largely driven by a sharp shortfall in oil earnings, long the backbone of Nigeria’s fiscal framework. Between January and July, oil revenue amounted to just N4.64 trillion, far below the pro rata target of N12.25 trillion. This translated into a shortfall of N7.62 trillion, or 62.2 per cent, reflecting challenges ranging from lower production to price volatility and operational constraints.
Non-oil revenue sources also failed to fully cushion the impact. Dividends from key entities such as Nigeria Liquefied Natural Gas (NLNG) and development finance institutions yielded only N104.64 billion, compared with a projected N428.71 billion, highlighting weak remittances from government investments.
Some tax lines, however, recorded modest improvements. Company Income Tax (CIT) generated N2.54 trillion, slightly above the pro rata estimate of N2.49 trillion, while Value Added Tax (VAT) outperformed expectations. The Federal Government’s share of VAT rose to N630.10 billion, exceeding the N567.54 billion target by about 11 per cent.
Despite these gains, weaknesses across other revenue heads outweighed the positives. Customs revenue declined to N988.29 billion, falling 39.1 per cent short of its N1.62 trillion target. Federation Account levies plunged by 70.1 per cent to N75.08 billion, while oil price royalties recorded no inflow at all during the period.
The MTEF noted that although VAT and the Electronic Money Transfer Levy provided some relief, their overperformance was insufficient to offset the scale of oil revenue losses.
Overall, aggregate Federal Government revenue stood at N13.67 trillion against a pro rata target of N23.85 trillion, leaving a revenue gap of N10.19 trillion, or 42.7 per cent, in the first seven months of 2025.
Debt Service Overshoots as Capital Spending Suffers
On the expenditure side, total Federal Government spending—including government-owned enterprises and project-tied loans—amounted to N20.40 trillion between January and July, compared with a pro rata target of N32.08 trillion, representing a shortfall of 36.4 per cent.
Recurrent expenditure remained broadly on track, with actual spending of N15.68 trillion, just 3.7 per cent below the pro rata benchmark of N16.28 trillion. However, within recurrent spending, non-debt items were significantly squeezed. Non-debt recurrent expenditure fell to N5.87 trillion, down 26 per cent from the expected N7.93 trillion.
Personnel costs for MDAs came in at N3.91 trillion, about 11.7 per cent below target, while personnel costs for government-owned enterprises matched the pro rata figure of N593.49 billion. Pension and gratuity payments were particularly underfunded, with only N445.67 billion released—barely half of the N842.34 billion expected.
By contrast, debt servicing overshot budget projections. The Federal Government spent N9.81 trillion on debt service during the period, exceeding the pro rata target of N8.35 trillion by 17.5 per cent. Domestic debt service stood at N4.65 trillion, 10.9 per cent above target, while foreign debt service climbed to N5.07 trillion, overshooting projections by 28.7 per cent. Contributions to the sinking fund lagged significantly at N96.70 billion, compared with the N220.09 billion budgeted.
Capital expenditure bore the brunt of the fiscal strain. Total capital spending reached just N3.60 trillion, far below the pro rata budget of N13.67 trillion, representing a shortfall of 73.7 per cent. Capital releases to MDAs were particularly weak, with only N834.80 billion disbursed out of a N10.81 trillion target.
The Budget Office attributed part of the weak capital outturn to the extension of the 2024 budget, noting that about N2.23 trillion from the previous year’s capital vote was still being financed in 2025 following the National Assembly’s approval to extend implementation to December.
The document also recalled that in 2024, Nigeria’s debt service bill stood at N13.12 trillion, equivalent to 77.5 per cent of Federal Government revenue. The 2025 figures suggest that debt servicing pressures remain persistently high, continuing to crowd out capital investment and severely constraining fiscal space for critical sectors such as health, education and infrastructure.
WHAT YOU SHOULD KNOW
The Federal Government’s finances are under severe strain as debt servicing alone consumed nearly 72% of total revenue in the first seven months of 2025, driven largely by a sharp collapse in oil earnings, leaving little fiscal space for salaries, capital projects, and critical social investments.
