Nigeria closed the first three quarters of last year with significantly improved revenue, but other details of the Federal Government's Budget Implementation Report (BIR) reveal an outlook that remains constrained by weak oil earnings, an uptick in debt service costs, and politically charged expanded overhead. This comes as the government continues to overshoot its key spending projections, discounting its capital expenditure estimate amid a widening unfunded deficit, which underpins the government's struggles to raise sufficient revenue to plug fiscal holes.
Revenue Performance and Shortfalls
The budget implementation report (BIR) of the first three quarters, as released by the Budget Office of the Federation (BOF), put the total retained Federal Government's revenue at N18.6 trillion. The amount was about 88.7 per cent of the total earnings for the entire previous year, pegged at N20.98 trillion, suggesting the country is on course to sustain the spike in revenue. Notwithstanding the expansion, the amount realised was still 40 per cent short of the N30.67 trillion prorated target for the nine months, a telling reality of the widening gap between expectation and the cold reality the country would need to confront and the inefficiency in the collection processes.
The government put its total revenue for the year at an ambitious N40.89 trillion, which it hoped to augment with a N14.1 trillion loan. At the end of September, the total loan secured was N12.07 trillion as opposed to the projected N10.58 trillion. This put the debt estimate overrun at 14 per cent, coming at a time when public outcry over debt accumulation has taken a disturbing turn.
Borrowing and Debt Dynamics
The revenue shortfall at the close of September was financed by domestic and project-tied bilateral and multilateral debts (which accounted for about 40 per cent of the total borrowed fund). There was zero borrowing from the foreign market besides the development financial institutions (DFIs). Nigeria was active in international markets in 2024 after returning to the Eurobond market. At the close of the year, the country borrowed N6.66 trillion from foreign, over 24 per cent of the projected figure. In 2023, when President Bola Tinubu assumed office, the government's exposure to the commercial foreign debt market was N1.82 trillion.
The drought in the international market last year was complemented by excessive domestic borrowing. At the close of 2024, the government's total domestic borrowing was 80 per cent of what it borrowed in the first three quarters last year – estimated at N7.07 trillion. The International Monetary Fund (IMF) and the World Bank had warned of significant crowding out of the private sector following the FG's overreaching in the local debt market. Over the years, Nigerian banks had prioritised participation in the government securities at the expense of private sector funding – a challenge partly linked to the risk premium of the economy and excessive borrowing.
The appropriation of net national credit also speaks to the preference for risk-free government funding. For instance, credit to the government as of April had grown by 65.5 per cent year-on-year, from N23.93 trillion to N39.6 trillion. On the flip side, credit to the private sector, the engine of economic growth, expanded by an insignificant 3.2 per cent. It stood at N80.59 trillion, a markup of N2.52 trillion compared to N78.07 trillion it stood in April 2025.
Recurrent Expenditure and Debt Service
Nigeria's fiscal deficit is complicated by rising recurrent expenditure, a challenge Tinubu has been unable to tackle, complicated by the creation of multiple new agencies and institutions. In nine months last year, the government spent N20.93 trillion on total recurrent expenditure. While the government kept the non-debt recurrent at a manageable level, N7.62 trillion or 75 per cent of what it planned to spend, the debt component seemed to have spiralled out of control, hitting N12.52 trillion in nine months. This pushed the total recurrent expenditure to over 100 per cent of the budgeted amount.
In comparison, the government overspent its 2024 actual recurrent spending, whether in terms of debt service or overhead. For the whole of 2024, its recurrent bills were N21.16 trillion or a mere N230 billion, its three quarters' spending last year. The 2024 debt service cost was also less than what it incurred in nine months last year by N160 billion, making the debt burden, indeed, a reality. The lowering debt service to revenue ratio, which the current administration has bragged about, may be gradually shifting again. In 2023, the ratio was 69 per cent, while it dropped significantly (by 10 percentage points) the subsequent year to 59 per cent. With the spike in the debt service cost in last year's interim report, the figure was 70 per cent, hovering around 67 per cent.
At an average quarterly expenditure of N4.17 trillion, the government's cost of debt service could climb to N16.7 trillion at the close of last year. The figure would be 245 per cent of the amount spent in 2023 (N6.82 trillion). Part of the debts the current administration is servicing are legacy loans accumulated by the late President Muhammadu Buhari, who raised the national public debt stock from N12.12 trillion to N87.38 trillion or by over 600 per cent. Tinubu has raised the figure by 72 per cent to N159.28 trillion. But the Debt Management Office (DMO) attributed much of the spike to naira revaluation. Notwithstanding the argument, external debt stock and service cost have remained uptick in the past three years, setting a record not witnessed even in the 'hell days' of the debt crisis before Olusegun Obasanjo's famous debt relief that wiped out $30 billion from the country's balance of payments (BOP) account.
Impact on Capital Expenditure
Experts are wary of the return to debt pitfall, warning of the dire consequences it could leave on the economy. Already, rising debt is a major constraint on the country's ability to fund critical infrastructure. From January to September, the country's total expenditure was N3.1 trillion, a paltry 18 per cent of the budgeted N17.58 trillion for the period. It blighted the celebration that welcomed the dedication of N23.4 trillion or 57 per cent of the entire spending envelope to capital projects. A growing debt burden leaves a decay effect on the country's infrastructure development. From 2023 to September 2025, the FG spent a total of N24.1 trillion on capital expenditure. As meagre as the figure is, experts baulk at the full deployment, with some arguing that net sending (less corruption) could be less than 30 per cent of the actual value released.
Oil Sector Challenges
The 2025 budget was benchmarked on oil production of 2.12 million barrels per day (mbpd) at a projected price of $75 per barrel. Neither assumption was achieved during the quarter as average crude oil production stood at 1.64 mbpd, while the average crude price settled at $68.5 per barrel. The twin shortfalls significantly weakened revenue performance. Gross oil revenue came in at N4.87 trillion against the quarterly target of N12.76 trillion, representing a shortfall of N7.88 trillion or 61.8 per cent.
The faltering revenue was validated by the Central Bank of Nigeria (CBN), showing that average domestic production slipped from roughly 1.46 million barrels per day in 2025 to about 1.41 million barrels per day in early 2026, just as crude exports declined from an average of 1.01 million barrels per day to 0.96 million barrels per day within the same period. The figures underscored the country's continued struggle with production constraints, oil theft, pipeline vandalism and operational inefficiencies and tension between rising expenditure and declining or stagnant revenue.
In January 2026, crude oil sold for about $68.05 per barrel, with domestic production standing at 1.46 million barrels per day and exports at 1.01 million barrels per day. By February 2026, production had dropped to 1.31 million barrels per day, while exports weakened to 0.86 million barrels per day despite higher oil prices. In April, when prices skyrocketed and touched $126.71 per barrel, production only improved marginally to 1.49 million barrels per day, while exports stood at 1.04 million barrels per day. The trend points to a fragile oil economy where revenue growth is being driven largely by external market conditions rather than structural improvements in output capacity.
The data showed that the disconnect between rising crude prices and weak export growth could limit the full fiscal benefits expected from the oil sector, in the face of heavy reliance on oil receipts to support foreign exchange (FX) earnings and budget implementation.
