Trouble for Economy as Debt Service, Salaries Exceed FG's Revenue, Oil Earnings Slump in 2025
- Federal government's revenue for the first seven months of 2025 fell short of the government's target by N10.19 trillion
- Debt servicing and personnel costs together exceeded total revenue during the period, as oil revenue recorded a shortfall of over 60%, driving the overall revenue gap
- Capital expenditure suffered deep cuts as the government prioritised recurrent spending and debt obligations in the year's spending
As weak earnings and rising obligations continue to strain public finances, debt servicing and personnel costs have exceeded the Federal Government’s total revenue in the first seven months of 2025.
This is according to an analysis of the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), released on Wednesday, December 17, on the website of the Budget Office of the Federation.
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Revenue falls short of target
As reported by PUNCH, the document shows that between January and July 2025, the Federal Government earned N13.67 trillion in aggregate revenue, far below the pro rata target of N23.85 trillion. This resulted in a revenue shortfall of N10.19 trillion, representing about 42.7% of the expected income.
The figures contrast with earlier remarks by President Bola Tinubu, who said in September that Nigeria had met its 2025 revenue target ahead of schedule and would no longer rely on borrowing to fund the budget.
According to the MTEF document, the shortfall was driven largely by a sharp decline in oil revenue. Oil receipts totalled N4.64 trillion during the period, compared with a pro rata target of N12.25 trillion, resulting in a gap of N7.62 trillion, or 62.2 per cent.
Dividends from entities such as Nigeria Liquefied Natural Gas (NLNG) and development finance institutions also underperformed, generating N104.64 billion against an expected N428.71 billion.
FG leads in total expenditure
While some non-oil revenues performed better, they were not enough to offset the overall gap. Company Income Tax slightly exceeded projections, while Value Added Tax outperformed its target by about 11 per cent. Customs revenue and several statutory levies, however, fell significantly below expectations.
On the expenditure side, the Federal Government spent N9.81 trillion on servicing domestic and foreign debts within the seven-month period. Personnel costs for ministries, departments and agencies, as well as government-owned enterprises, amounted to N4.51 trillion.
Combined, debt service and salaries totalled about N14.32 trillion, exceeding total revenue by roughly five per cent. The document showed that debt servicing alone consumed about 71.8 per cent of Federal Government revenue during the period.
Oil revenue declines
The Budget Office noted that the trend reflects Nigeria’s continued fiscal vulnerability, particularly to the oil sector underperformance, despite gradual improvements in non-oil revenue sources.
Capital expenditure suffered the most under the tight fiscal conditions. Total capital spending between January and July stood at N3.60 trillion, compared with a pro rata budget of N13.67 trillion, representing a shortfall of 73.7 per cent.
Capital releases to ministries, departments and agencies were especially low. Out of a prorated target of N10.81 trillion, only N834.80 billion was released, meaning over 90 per cent of planned capital funds for the period were not disbursed.
Why 2024 budget was extended
The Budget Office partly attributed the weak capital outturn to the extension of the 2024 budget, which allows ongoing projects to continue into December 2025. As a result, some capital spending in 2025 is still being financed under the 2024 budget framework.
The Federal Government has also directed MDAs to roll over 70 per cent of their 2025 capital budget into the 2026 fiscal year, citing weak revenue performance and the need to complete ongoing projects.
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While some economists have criticised the move, arguing that it reflects delays in budget implementation and weak planning, others have supported the decision as a practical step to restore credibility and reduce the practice of running multiple budgets at the same time.
The MTEF warned that high debt servicing costs and limited fiscal space continue to constrain investment in critical sectors such as infrastructure, health and education.
Nigeria spends N8.93 trillion servicing debt
Legit.ng reported earlier that the Nigerian government spent about N8.93 trillion servicing debt in the first nine months of this year.
The amount was 61% of the N14.55 trillion revenue generated in the period reviewed. This exposes Nigeria’s fiscal fragility, as the country struggles with weak earnings.
Experts have said Nigeria’s surging debt service, which stood at $6.2 billion in dollar terms, was pressuring government earnings.
Proofreading by Kola Muhammed, copy editor at Legit.ng.
Source: Legit.ng
