Nigeria's public finances are under severe strain as official data reveals that the cost of servicing the national debt and paying government workers' salaries has surpassed the total revenue collected by the Federal Government in the first seven months of 2025.
Revenue Falls Drastically Short of Target
According to the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) published on the Budget Office website, the government's earnings between January and July 2025 were far below expectations. The Federal Government earned N13.67 trillion in aggregate revenue, which was a staggering N10.19 trillion short of the pro rata target of N23.85 trillion for that period.
This massive shortfall, representing about 42.7% of expected income, contradicts earlier statements made in September by President Bola Tinubu, who claimed Nigeria had met its 2025 revenue target ahead of schedule and would cease budget borrowing.
Oil Sector Collapse Drives Fiscal Gap
The primary driver of the revenue crisis was a catastrophic underperformance in the oil sector. Oil receipts totalled only N4.64 trillion against a pro rata target of N12.25 trillion, creating a deficit of N7.62 trillion or 62.2%. This slump in oil earnings was the dominant factor in the overall fiscal gap.
Other revenue streams also disappointed. Dividends from major state-owned entities like the Nigeria Liquefied Natural Gas (NLNG) company and various development finance institutions brought in just N104.64 billion, far below the projected N428.71 billion.
While some non-oil revenues like Value Added Tax (VAT) outperformed targets by about 11%, and Company Income Tax slightly exceeded projections, these gains were insufficient to offset the enormous shortfall from oil and other underperforming areas like Customs revenue.
Debt and Salaries Consume All Revenue
On the expenditure side, the figures paint a dire picture of fiscal sustainability. During the seven-month period, the government spent N9.81 trillion on servicing domestic and foreign debts. Personnel costs for all ministries, departments, agencies, and government-owned enterprises amounted to N4.51 trillion.
Combined, debt service and salaries totalled approximately N14.32 trillion, which exceeded the total revenue of N13.67 trillion by roughly five percent. This means every naira earned, and more, was consumed by these two recurrent expenditures alone. The data shows that debt servicing alone consumed about 71.8% of all Federal Government revenue in the period.
Capital Expenditure Suffers Deep Cuts
The immediate casualty of this fiscal squeeze was capital expenditure, which funds critical infrastructure, health, and education projects. Total capital spending between January and July stood at just N3.60 trillion, compared with a pro rata budget of N13.67 trillion—a shortfall of 73.7%.
The releases to ministries, departments, and agencies were even more drastic. Out of a prorated target of N10.81 trillion, only N834.80 billion was released, meaning over 90% of planned capital funds for the period were not disbursed.
The Budget Office attributed part of this weak capital spending to the extension of the 2024 budget, which allows ongoing projects to continue into December 2025. Furthermore, the Federal Government has directed MDAs to roll over 70% of their 2025 capital budget into the 2026 fiscal year, citing poor revenue performance.
The MTEF document explicitly warns that high debt servicing costs and limited fiscal space continue to severely constrain public investment in the nation's critical development sectors. This analysis follows a previous Legit.ng report which indicated that Nigeria spent about N8.93 trillion on debt servicing in the first nine months of the year, consuming 61% of generated revenue and highlighting the country's ongoing fiscal fragility.
