Nigeria’s public finances came under intense strain in the first seven months of 2025 as the Federal Government spent more on debt service and salaries than it earned in total revenue, raising fresh concerns about fiscal sustainability and crowding out growth-enhancing investments.
Official data from the Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) for 2026-2028, published by the Federal Budget Office, shows that between January and July 2025, the government earned £13.67 trillion in revenue.
This was well below the prorated target of £23.85bn, resulting in a revenue shortfall of £10.19bn, or 42.7 per cent.
The figures are in stark contrast to President Bola Tinubu’s public claim in September that Nigeria had met its 2025 revenue target in August and stopped borrowing, suggesting fiscal pressures remain acute.
Commenting on the figures, Dr Yemisi Ayinde, a researcher at Covenant University in Otta, described the situation as deeply worrying. “This is really shocking and you can’t really understand what’s really happening,” he said.
Ayinde noted that when recurrent expenditure – especially debt servicing – absorbs almost all of the government’s revenue, capital expenditure becomes the immediate victim.
He cited independent assessments by the Nigerian Economic Summit Group (NESG), showing that Nigeria’s debt service to income ratio rose to 116.8 percent in 2024 and remained critically high at around 113 percent in the first quarter of 2025.
“In strict public finance terms, this means that debt service alone exceeded total federal revenues, forcing the government to rely on new borrowing simply to meet existing obligations, a classic sign of fiscal stress,” he said.
The income gap was largely due to weak oil revenues. Oil revenues amounted to £4.64bn, compared to the £12.25bn forecast, representing a shortfall of 62.2 per cent. While some non-oil revenues showed resilience (corporate income tax slightly exceeded target and value-added tax (VAT) revenues increased about 11 percent), these gains were offset by declines in customs revenues, federation levies, and other oil-related revenues.
On the expense side, only debt service and personnel costs exceeded total revenue. Debt service payments amounted to £9.81bn, while salaries and related staff costs amounted to £4.51bn. The combined expenditure of £14.32bn represented around 105 per cent of the total revenue earned during the period.
The implication is clear: virtually all government revenues were absorbed by recurring fixed obligations, leaving little or no fiscal space for development spending. Capital spending suffered the sharpest contraction, with just £3.60bn spent, compared to a pro rata allocation of £13.67bn, an underperformance of almost 74 per cent. Capital releases to ministries, departments and agencies were particularly weak.
The Budget Office partly attributed the poor capital result to the extension of the budget from 2024 to 2025, which created overlapping fiscal commitments and distorted spending execution. To address this, President Tinubu has asked the National Assembly to pass a 2024 Repeal and Recreation of Appropriations Bill, which proposes a total expenditure of £43.56 billion, with the aim of ending the practice of running overlapping budgets.
According to Ayinde, while the Federal Government has repeatedly claimed to have improved fiscal sustainability (citing reductions in debt service to revenue ratios from around 97 per cent to less than 50 per cent), these claims conflict with independent data. “Either selective metrics are being used or the underlying fiscal position has not improved to the extent publicly represented,” Ayinde said.
Analysts warn that a debt service-to-income ratio that approaches or exceeds 100 percent is considered fiscally unsustainable. It suppresses capital formation, limits economic growth, and locks the government into a cycle in which debt finances consumption rather than productivity.
Until these contradictions are transparently reconciled, experts say Nigeria’s fiscal narrative will continue to face questions about credibility, coherence and long-term sustainability.