Despite a substantial decline in collections and significant cuts to major projects, the federal government’s debt service and personnel costs have consumed more than its entire revenue during the first seven months of 2025.
According to an analysis of the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper published on the Budget Office of the Federation’s website on Wednesday, the federal government’s total revenue from January to July was N13.67 trillion, as opposed to a pro rata target of N23.85 trillion.
According to The PUNCH, this resulted in a revenue imbalance of N10.19 trillion, or around 42.7%.
This deficiency came after President Bola Tinubu declared in September that Nigeria had surpassed its 2025 income goal on time and would no longer need to borrow money to pay for its budget.
Speaking to The Buhari Organization stakeholders who paid him a visit at the Presidential Villa in Abuja, Tinubu stated that his administration’s non-oil revenue strategy had produced enough to satisfy this year’s predictions by August, lowering Nigeria’s reliance on foreign loans.
I can boast in front of you today that Nigeria is not borrowing. Tinubu informed the group, which included Sen. Tanko Al-Makura, a former governor of Nasarawa State, and other leaders of the ruling All Progressives Congress, that they had achieved their income goal for the year, which they had done in August.
The MTEF document, however, demonstrates that the revenue crisis was primarily caused by a sharp decline in oil earnings, refuting the president’s assertion. There was a shortfall of N7.62 trillion, or 62.2 percent, between January and July’s oil revenue of N4.64 trillion and the pro rata objective of N12.25 trillion.
Dividends from organizations like Nigeria Liquefied Natural Gas and development financing institutions also fared poorly, bringing in only N104.64 billion as opposed to the anticipated N428.71 billion. Some non-oil tax heads, however, performed better than anticipated. The federal government collected N2.54 trillion in company income taxes, which was somewhat more than the prorated projection of N2.49 trillion.
Value Added Tax also exceeded expectations, with FGN’s portion increasing by over 11% to N630.10 billion from a target of N567.54 billion.
These improvements, however, were insufficient to make up for other shortcomings.
Customs collections declined to N988.29 billion, or 39.1% less than the pro rata objective of N1.62 trillion, while Federation Account levies fell 70.1% to N75.08 billion.
Both the oil price royalty share and the Nigeria Police Trust Fund levy fell well short of projections, with the latter showing no inflow over the time frame.
Overall, even if VAT and EMTL offered some respite, their superior performance was not enough to make up for the significant drop in oil revenues and lower-than-anticipated CIT collections, according to the MTEF report.
“Even as non-oil revenue sources gradually increase their contribution to the Federation Account, the midyear outcome highlights Nigeria’s continued fiscal vulnerability to oil sector underperformance.”
The report also revealed that the federal government spent N9.81 trillion on debt servicing, both domestically and abroad, within the same time frame. Together with the N4.51 trillion in personnel expenditures for ministries, departments, agencies, and government-owned businesses, debt service and wages came to almost N14.32 trillion, which was somewhat more than the total amount of money made during that time.
This indicates that just wages and debt accounted for about 105% of the Federal Government’s revenue. The report highlighted the strain loan repayments are putting on the budget by revealing that debt servicing alone already accounted for around 71.8% of total Federal Government revenue in the first seven months of the year.
The capital budget suffers
In terms of spending, the federal government seemed to be more successful at meeting ongoing commitments than financing capital projects.
In the first seven months, total federal government spending (including government-owned businesses and project-tied loans) was N20.40 trillion, which is 36.4 percent less than the pro rata objective of N32.08 trillion. Recurrent spending, on the other hand, was considerably more in line with the plan; at N15.68 trillion, real spending fell just 3.7% short of the pro rata objective of N16.28 trillion.
The non-debt recurrent spending on recurrent items was N5.87 trillion, which was 26% less than the anticipated N7.93 trillion. Government-owned enterprises’ personnel expenditures were perfectly in line with the projected N593.49 billion, while MDAs’ personnel costs were N3.91 trillion, or around 11.7% less than the N4.43 trillion anticipated for the period. At N445.67 billion, or less than half of the N842.34 billion pro rata amount, pensions and gratuities, including service-wide pensions, were significantly underfunded.
Overheads and other service-wide votes showed the pinch even more clearly. While the overheads for GOEs were fully revealed, the MDAs’ overheads came to N249.82 billion, 64.8% less than the N709.53 billion objective.
In contrast to a prorated budget of N617.09 billion, other service-wide votes only received N56.73 billion, representing a 90.8% deficiency. Despite an anticipated N116.67 billion, the special intervention program received no financing during that time.
Debt service, on the other hand, exceeded its budget. During the seven months, the federal government spent N9.81 trillion on debt commitments, which was 17.5% above than the objective of N8.35 trillion. Foreign debt service surged to N5.07tn, or 28.7% higher than the N3.94tn prediction, while domestic debt service was N4.65tn, 10.9% higher than the N4.19tn pro rata figure.
The sinking fund, which is used to pay down maturing obligations, recorded N96.70 billion instead of N220.09 billion, falling short of its goal.
The problem of high debt is not new. The same MTEF report noted that the total cost of debt service in 2024 was N13.12 trillion, or 46% of federal government spending and 77.5% of revenues. It also cautioned that high servicing costs and tight budgetary constraints were limiting investment in vital areas like infrastructure, health, and education.
Rollover of capital projects
Thus far in 2025, capital investment has been the most severely impacted by the budgetary constraints. The first seven months’ total capital expenditure was N3.60 trillion, which is 73.7% less than the projected budget of N13.67 trillion.
Capital projects carried out by MDAs had the biggest reductions. MDAs and other capital votes only received N834.80 billion, which means that over nine tenths of the intended capital funds for the period were not disbursed, compared to a pro rata objective of N10.81 trillion.
While international and bilateral project-tied loans reported N1.68 trillion, which was somewhat less than the N1.96 trillion prorated forecast, grants and donor-funded projects performed better, spending N609.13 billion as opposed to N421.11 billion pro rata.
The Budget Office attributed the lackluster capital outturn in part to the 2024 budget extension. It clarified that, following the National Assembly’s approval of a rollover of the 2024 capital budget to December 2025, some current projects were still being funded under last year’s capital provisions.
Consequently, additional releases under the 2025 capital budget were carefully regulated in accordance with revenue performance, while a portion of the 2024 capital vote—roughly N2.23 trillion—was being financed in 2025.
The document added that expenditure releases in 2025 had been “cautiously managed in line with revenue outturns and the extended implementation of the FY 2024 budget.” It is noteworthy that the capital component of the 2024 budget is still being executed, as the National Assembly approved an extension of its implementation period until December 2025.
Recent years have seen overlapping fiscal cycles, with capital components of prior budgets continuing well into succeeding years due to budget passage delays, late fund releases, and numerous supplemental appropriations.
As previously reported, President Bola Tinubu requested that the National Assembly review and approve the Appropriation, Repeal and Re-enactment Bill 2 of 2024, which calls for N43.56 trillion in planned spending for the 2025 fiscal year.
Yesterday, the Senate and the House of Representatives received separate letters outlining the request.
“Ending the practice of running multiple budgets, while ensuring improved capital performance for both the 2024 and 2025 capital budgets” is the president’s stated goal of the proposed law.
“The purpose of this bill is to ensure reasonable, if not historically high, capital performance rates on the 2024 and 2025 capital budgets while also ending the practice of running multiple budgets concurrently,” he said.
As previously reported, as part of the administration’s efforts to prioritize the completion of ongoing projects and control spending pressures in the face of weak revenues, the federal government directed ministries, departments, and agencies to carry over 70% of their 2025 capital budget into the 2026 fiscal year.
The Federal Ministry of Budget and Economic Planning’s 2026 Abridged Budget Call Circular, which was distributed to all ministers, service chiefs, agency heads, and senior government officials in Abuja, includes this directive.
According to the circular, instead of looking for new initiatives, ministries and agencies should stick to the funding previously authorized in the 2025 budget.
It clarified that the rollover is predicated on the administration’s development priorities as well as the country’s current needs. National security, the economy, education, health, agriculture, infrastructure, power, and energy, as well as social safety nets including women’s and youth empowerment, were among the objectives that were mentioned as being in line with the government’s policy agenda.
The circular states that in order to continue in FY2026, MDAs must upload 70% of their 2025 FGN Budget. All of these rollovers and uploads must be in accordance with the nation’s urgent needs as well as the government’s development priorities that support the new administration’s policy direction, which is centered on social safety nets, women’s and youth empowerment, the economy, education, health, agriculture, infrastructure, power, and energy.
Additionally, it clarified that, in lieu of the prior practice of a typical rollover, only 30% of the 2025 capital budget would be made available for the current fiscal year, with the remaining 70% acting as the basis for the 2026 capital budget.
Sheriffdeen Tella, an economist and lecturer at Olabisi Onabanjo University, has criticized the foundation for creating the 2026 budget before the 2025 budget’s execution had even started.
Because “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,” he expressed concern about the 2026 deficit.
“There is no basis for any budget because what they had, they have not implemented,” Tella continued, adding that the government ought to have extended the 2025 plan into 2026 rather than creating a new one.
The government’s departure from the January to December budget cycle was also criticized by Professor Adeola Adenikinju, National President of the Nigerian Economic Society. According to him, the MTEF/FSP approval’s timing demonstrated that Nigeria was once more behind schedule, which erodes predictability and makes economic planning more difficult.
“The 2026 budget should have been in the National Assembly for consultation so that we can stick to this January 1st thing,” stated Adenikinju. Our fiscal system is predictable as a result. He maintained that the National Assembly is unable to conduct adequate examination because of the delayed budget presentation.
Nonetheless, Dr. Muda Yusuf, Director of the Center for the Promotion of Private Enterprise, endorsed the federal government’s choice to carry over 70% of the 2025 budget to the next year.
He claimed that it was an essential step in restoring the budget process’s legitimacy. If the scenario were let to continue indefinitely, he explained, it would be necessary to “normalize things because there will be no end to continuous rolling wells of budgets.”
Yusuf clarified that it was impractical to continue authorizing new capital allocations while earlier ones remained unexecuted.
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