Nigeria revenue strain worsens as debt service and personnel costs exceed Federal Government income amid sharp revenue shortfalls
Nigeria’s public finances came under severe strain in the first seven months of 2025 as debt service and personnel costs exceeded the Federal Government’s total revenue, highlighting deep fiscal pressures driven by weak oil receipts and underfunded capital spending.
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An analysis of the 2026 to 2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper, published on Wednesday by the Budget Office of the Federation, showed that the Federal Government earned N13.67tn between January and July, far below the pro rata revenue target of N23.85tn.
The shortfall of N10.19tn, equivalent to 42.7 per cent, contradicts earlier claims by President Bola Tinubu that Nigeria had met its 2025 revenue target ahead of schedule and would no longer rely on borrowing to finance the budget.
In September, while addressing members of The Buhari Organisation at the Presidential Villa in Abuja, President Tinubu said the administration’s non-oil revenue drive had yielded enough income to meet projections by August, reducing dependence on loans.
However, figures contained in the MTEF document do not support that assertion, showing that the revenue gap was largely driven by a steep decline in oil earnings.
Oil revenue for the period stood at N4.64tn, compared with a pro rata target of N12.25tn, representing a shortfall of N7.62tn or 62.2 per cent.
Dividend income from entities such as Nigeria Liquefied Natural Gas and development finance institutions also underperformed, generating N104.64bn against an expected N428.71bn.
Some non-oil taxes provided limited relief, with Company Income Tax collections reaching N2.54tn, slightly above the prorated estimate.
Value Added Tax outperformed projections, with the Federal Government’s share rising to N630.10bn against a target of N567.54bn.
Customs revenues, however, fell sharply to N988.29bn, about 39.1 per cent below target, while Federation Account levies dropped by more than 70 per cent.
The MTEF noted that while stronger VAT performance offered some support, it was insufficient to offset the deep oil revenue shortfall, underscoring Nigeria’s continued vulnerability to oil sector underperformance.
On the expenditure side, the pressure was stark.
The Federal Government spent N9.81tn on servicing domestic and external debt in the seven months, while personnel costs for ministries, departments, agencies, and government-owned enterprises totalled N4.51tn.
Combined, debt service and salaries amounted to N14.32tn, exceeding total revenue and accounting for about 105 per cent of income.
Debt servicing alone consumed 71.8 per cent of Federal Government revenue during the period, highlighting the mounting burden repayments are placing on public finances.
Total Federal Government expenditure, including government-owned enterprises and project-tied loans, stood at N20.40tn, well below the pro rata target of N32.08tn.
While recurrent spending was broadly on track, capital expenditure suffered deep cuts.
Aggregate capital spending reached only N3.60tn against a prorated budget of N13.67tn, a shortfall of 73.7 per cent.
Capital releases to ministries, departments, and agencies were particularly weak, with just N834.80bn disbursed compared with a target of N10.81tn.
The Budget Office linked the weak capital performance partly to the extension of the 2024 budget, noting that about N2.23tn of last year’s capital vote was still being financed in 2025 following approval by the National Assembly to roll over implementation until December.
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The document warned that persistent revenue weakness, high debt service costs, and constrained fiscal space continue to limit investment in critical sectors such as infrastructure, health, and education, reinforcing concerns over Nigeria’s fragile fiscal outlook.
