By Debt servicing and personnel costs consumed more than the Federal Government’s total revenue in the first seven months of 2025, as earnings fell significantly below projections and capital spending faced severe constraints.
An analysis of the 2026–2028 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper, published on Wednesday by the Budget Office of the Federation, revealed that between January and July 2025, the Federal Government generated N13.67 trillion in aggregate revenue. This figure was far below the prorated target of N23.85 trillion for the period.
The shortfall of N10.19 trillion represents a revenue gap of approximately 42.7 per cent. This performance contrasts sharply with claims made earlier in September by President Bola Tinubu, who stated that Nigeria had already met its 2025 revenue target ahead of schedule and would no longer depend on borrowing to finance its budget.
Speaking to members of The Buhari Organisation during a visit to the Presidential Villa in Abuja, Tinubu said the administration’s non-oil revenue drive had yielded sufficient results to meet annual projections by August. “Today, I can stand here before you to brag: Nigeria is not borrowing. We have met our revenue target for the year, and we met it in August,” the president told the delegation, which included former Nasarawa State Governor, Senator Tanko Al-Makura, and other leaders of the All Progressives Congress.
However, figures contained in the MTEF document do not support this assertion. The data show that the revenue challenges were driven largely by a sharp decline in oil earnings. Oil revenue between January and July stood at N4.64 trillion, compared with a prorated target of N12.25 trillion, resulting in a shortfall of N7.62 trillion, or 62.2 per cent.
Dividends from government-owned entities, including the Nigeria Liquefied Natural Gas and development finance institutions, also underperformed. These sources generated only N104.64 billion during the period, far below the expected N428.71 billion.
Some non-oil revenue streams, however, recorded marginal improvements. Company Income Tax collections attributable to the Federal Government reached N2.54 trillion, slightly exceeding the prorated estimate of N2.49 trillion. Value Added Tax also outperformed expectations, with the Federal Government’s share rising to N630.10 billion, compared with a target of N567.54 billion — an increase of about 11 per cent. Despite these gains, they were insufficient to offset weaknesses across other revenue lines.
Customs revenues declined to N988.29 billion, falling 39.1 per cent short of the N1.62 trillion target. Federation Account levies also plunged by 70.1 per cent, dropping to N75.08 billion.
The Nigerian Minister of Finance and Coordinating Minister of the Economy, Wale Edun.
Other revenue components, including the Nigeria Police Trust Fund levy and oil price royalties, recorded significant underperformance, with oil price royalty generating no inflows during the period under review.
According to the MTEF document, “Overall, while VAT and EMTL provided some relief, their overperformance was insufficient to offset the deep shortfall in oil revenues and weaker-than-expected CIT collections.”
It added that, “The midyear outcome highlights Nigeria’s continued fiscal vulnerability to oil sector underperformance, even as non-oil revenue sources gradually increase their contribution to the Federation Account.”
On the expenditure side, the Federal Government spent N9.81 trillion on servicing domestic and external debts between January and July 2025. When combined with personnel costs of N4.51 trillion across ministries, departments and agencies, as well as government-owned enterprises, total spending on debt service and salaries rose to approximately N14.32 trillion.
This figure exceeds the total revenue generated during the same period, meaning that debt servicing and wages alone accounted for about 105 per cent of the Federal Government’s income. The data further show that debt servicing consumed roughly 71.8 per cent of aggregate Federal Government revenue within the first seven months of the year, underscoring the growing pressure that loan repayments continue to place on Nigeria’s public finances.
Capital Budget Bears the Brunt of Fiscal Pressure
On the expenditure side, the Federal Government recorded better performance in meeting recurrent obligations than in financing investment and capital projects during the first seven months of 2025.
Total Federal Government expenditure — including government-owned enterprises (GOEs) and project-tied loans — stood at N20.40 trillion between January and July, compared with a pro rata target of N32.08 trillion. This represents a shortfall of 36.4 per cent. Recurrent expenditure, however, tracked closer to projections. Actual recurrent spending amounted to N15.68 trillion, just 3.7 per cent below the N16.28 trillion pro rata benchmark.
Within recurrent expenditure, non-debt recurrent spending totalled N5.87 trillion, reflecting a 26 per cent decline from the prorated estimate of N7.93 trillion. Personnel costs for ministries, departments and agencies (MDAs) reached N3.91 trillion, about 11.7 per cent lower than the expected N4.43 trillion. Personnel expenditure for government-owned enterprises matched projections exactly at N593.49 billion.
Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso.
Spending on pensions and gratuities, including service-wide pensions, was significantly underfunded. Only N445.67 billion was released during the period, barely half of the N842.34 billion pro rata allocation.
The fiscal strain was even more pronounced in overheads and service-wide votes. Overheads for MDAs amounted to N249.82 billion, a steep 64.8 per cent shortfall from the N709.53 billion target. While overheads for GOEs were fully released, other service-wide votes received just N56.73 billion, compared with a prorated allocation of N617.09 billion — a shortfall of 90.8 per cent. The special intervention programme received no funding at all, despite a projected allocation of N116.67 billion for the period.
In contrast, debt servicing exceeded budget expectations. The Federal Government spent N9.81 trillion on debt obligations in the first seven months of 2025, overshooting the pro rata target of N8.35 trillion by 17.5 per cent. Domestic debt service reached N4.65 trillion, 10.9 per cent above the N4.19 trillion projection, while foreign debt service rose sharply to N5.07 trillion — about 28.7 per cent higher than the N3.94 trillion estimate.
The sinking fund, used for redeeming maturing obligations, underperformed significantly, with only N96.70 billion recorded against a target of N220.09 billion.
The burden of debt servicing remains a persistent challenge. The same Medium-Term Expenditure Framework recalled that total debt service in 2024 stood at N13.12 trillion, accounting for 46 per cent of total Federal Government expenditure and 77.5 per cent of revenues. It warned that rising servicing costs and limited fiscal space continue to crowd out investment in key sectors such as health, education, and infrastructure.
Capital Projects Take the Heaviest Hit
Capital expenditure has suffered the most severe impact of the fiscal squeeze in 2025. Aggregate capital spending for the first seven months stood at N3.60 trillion, far below the prorated budget of N13.67 trillion — a shortfall of 73.7 per cent.
The sharpest contraction was recorded in capital projects executed by MDAs. Against a pro rata allocation of N10.81 trillion, only N834.80 billion was released, meaning more than 90 per cent of planned capital funds for the period were not disbursed.
Grants and donor-funded projects performed relatively better, with N609.13 billion spent compared with a prorated estimate of N421.11 billion. Multilateral and bilateral project-tied loans recorded expenditure of N1.68 trillion, slightly below the N1.96 trillion projection.
According to the Budget Office of the Federation, the weak capital performance was partly due to the extension of the 2024 budget. The office explained that many ongoing projects continued to be financed under the 2024 capital provisions following the National Assembly’s approval to roll over the 2024 capital budget to December 2025.
Nigeria was downgraded by Fitch Ratings as government debt service costs and external liquidity worsen, despite higher crude prices.
As a result, approximately N2.23 trillion from the 2024 capital vote is being financed in 2025, while releases under the 2025 capital budget have been cautiously managed in line with revenue performance. “It is important to note that the execution of the capital component of the 2024 budget remains ongoing, following the National Assembly’s approval to extend its implementation period until December 2025,” the document stated, adding that expenditure releases in 2025 have been “cautiously managed in line with revenue outturns and the extended implementation of the FY 2024 budget.”
In recent years, delays in budget passage, late releases of funds, and frequent supplementary appropriations have resulted in overlapping fiscal cycles, with capital components of previous budgets extending well into subsequent fiscal years.
Earlier, The PUNCH reported that President Bola Tinubu asked the National Assembly to consider and pass the Appropriation, Repeal and Re-enactment Bill 2 of 2024, which proposes a total expenditure of N43.56 trillion for the 2025 fiscal year.
The request was conveyed through separate letters addressed to the Senate and the House of Representatives on Wednesday. According to the President, the proposed legislation is intended to end the long-standing practice of running multiple budgets simultaneously while improving capital budget performance.
He explained that the bill is designed to “end the practice of running multiple budgets, while ensuring improved capital performance for both the 2024 and 2025 capital budgets.”
Tinubu further stated, “This bill is to bring an end to the practice of running multiple budgets concurrently, while at the same time ensuring reasonable — indeed unprecedentedly high — capital performance rates on the 2024 and 2025 capital budgets.”
Earlier reports also indicated that the Federal Government had directed ministries, departments, and agencies (MDAs) to roll over 70 per cent of their 2025 capital budget into the 2026 fiscal year, as part of efforts to prioritise the completion of ongoing projects and manage spending pressures amid weak revenue performance.
The directive was contained in the 2026 Abridged Budget Call Circular issued by the Federal Ministry of Budget and Economic Planning and circulated to ministers, service chiefs, heads of agencies, and senior government officials in Abuja.
According to the circular, MDAs are required to continue with capital allocations already approved in the 2025 budget rather than proposing new projects. The rollover, the document explained, is guided by what it described as the country’s immediate needs and the administration’s development priorities.
These priorities include national security, economic growth, education, health, agriculture, infrastructure, power and energy, as well as social safety nets, with particular emphasis on women and youth empowerment.
The circular stated:
“MDAs are to upload 70 per cent of their 2025 FGN Budget to continue in FY2026. All such rollover and uploads MUST be in line with the immediate needs of the country as well as the government’s development priorities that align with the policy direction of the new administration, which hinges on National Security, the Economy, Education, Health, Agriculture, Infrastructure, Power & Energy, as well as social safety nets, women & youth empowerment.”
Nigerian President, Bola Ahmed Tinubu.
It further clarified that only 30 per cent of the 2025 capital budget would be released within the current fiscal year, while the remaining 70 per cent would form the base of the 2026 capital budget, effectively replacing the traditional rollover system.
Reacting to the development, economist and professor at Olabisi Onabanjo University, Sheriffdeen Tella, criticised the rationale behind preparing the 2026 budget when implementation of the 2025 budget had barely commenced.
He described the 2026 deficit projections as troubling, arguing that “the budget of 2026 is supposed to be premised on the implementation or performance of 2025,” yet “they have just started implementing the 2025 budget… in December 2025.”
Tella added that “there is no basis for any budget because what they had, they have not implemented,” and maintained that the government ought to have rolled over the 2025 budget into 2026 rather than preparing a fresh fiscal document.
Similarly, the National President of the Nigerian Economic Society, Professor Adeola Adenikinju, faulted the Federal Government for drifting away from the January-to-December budget cycle. He said the timing of the approval of the Medium-Term Expenditure Framework and Fiscal Strategy Paper showed that Nigeria was once again running behind schedule, undermining fiscal predictability and complicating economic planning.
“The 2026 budget should have been in the National Assembly for consultation so that we can keep to this January 1st thing. That makes our fiscal system predictable,” Adenikinju said, adding that late budget presentations prevent lawmakers from conducting proper scrutiny.
However, the Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, defended the Federal Government’s decision to roll over 70 per cent of the 2025 capital budget into 2026.
He described the move as a necessary step to restore credibility to the budget process, arguing that it would help “normalise things because there will be no end to continuous rolling waves of budgets” if the situation were allowed to persist indefinitely.
Yusuf further explained that it was unrealistic to keep approving new capital allocations when previously approved projects remained unimplemented.
