During the period, the federal government raised N11.89 trillion from various debt financing sources, but spent just N3.10tn on capital projects in the first nine months of 2025. This indicates the huge difference between borrowing and infrastructure spending.
Latest statistics from the Federation’s Budget Office’s Third Quarter 2025 Budget Implementation Report, indicated overall debt finance inflows for September 2025 amounted at N11.89tn, comprising N7.08tn domestic borrowing and N4.81tn multilateral and bilateral project-tied loans.
Actual capital expenditure over the same time was N3.10tn, which is merely 26.07 per cent of total financing proceeds, The PUNCH writes.
The result was also far behind the prorated capital expenditure target of N17.58tn for the first three quarters of the year, with actual spending falling short by N14.48tn or 82.3 per cent.
A breakdown of the spending indicated that Ministries, Departments and Agencies spent N1.21tn on capital investment, while Government-Owned Enterprises spent N615.68bn. N1.08tn spent on donor-funded projects and grants.
Interestingly, there was no expenditure recorded in the multilateral and bilateral project-tied loan component even with a provision of N2.52tn budget for such projects in three quarters.
The report blamed the delayed pace of project implementation to administrative and cash management difficulties. “Delays in bottom-up cash planning are some of the cash management bottlenecks that continue to delay project execution and increase project cost risks,” the Budget Office said.
The results reveal that, while the government continued to significantly depend on domestic and foreign sources of finance to sustain budget execution, only a small part of the borrowed funds had been converted into actual capital project expenditure by the end of the third quarter.
A renowned economist and Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf had earlier warned that the increasing borrowing of the federal government from the domestic financial system is crowding out the private sector as banks prefer low-risk, high-yield government securities to lending to businesses.
“Part of the rise in credit to the government is attributable to a number of reasons.
The government has been raising money to make up the deficit. So this financing of the deficit has led to the issuing of bonds, treasury bills and so on and this is also bought by banks. “The rate is also very attractive and it is more attractive to them than lending to the real sector,” Yusuf remarked.
He also called on the government to rein in its indebtedness.
Also, the Director-General of the Manufacturers Association of Nigeria, Segun Kadir Ajayi had earlier claimed that credit data from the financial system points to a clear crowding-out of private sector borrowing by government demand.
Ajayi said the trend was a reflection of the inclination of commercial banks and other financial institutions to lend to government, given the prevailing interest rates and perceived lower risk, at the expense of productive sectors of the economy.
The MAN DG said: “The data is a trend that proves something. Usually when you observe these kind of patterns it means that the private sector is getting crowded out on the borrowing side. Because when you borrow, you would pay back, and thus, the rate at which you borrow is essential for your business. And when the commercial banks and financial institutions, they find it a lot easier to lend to the government rather than to the private sector.”
The industrial sector has been particularly hard hit, with many enterprises scaling back financing for expansion and sourcing raw material because of the high cost and dismal economic conditions, Ajayi said.
Reacting to critiques of the government’s expanding debt profile, the Director-General of the Budget Office of the Federation, Dr Tanimu Yakubu, said deficit financing and public borrowing were established tools of macroeconomic management and not indicators of fiscal recklessness.
In a recent statement he said governments were expected to intervene by borrowing and spending during periods of economic stress, noting that public spending on infrastructure, security and social programmes eventually circulated through the economy as income, business revenues and tax receipts.
Yakubu said the country’s financial problems were not just the result of the present administration’s policies, but decades of structural deficiencies, including subsidy distortions, oil dependence and insufficient revenue mobilisation.
But he said the country’s immediate issue was to increase income collection and to ensure that borrowed funds were used efficiently, despite debt levels remaining relatively mild by worldwide standards.
However, the difference between the funding inflows and actual capital spending points to the difficulties in implementing the budget.
Nigeria cannot continue to rely on borrowing to finance growth, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele has warned, adding that the country must put in place a sustainable fiscal framework to support important sectors of the economy.
“Nigeria cannot continue to fund development largely through borrowing. “We need to build a fiscal system that can sustainably finance critical infrastructure, quality education, affordable health care, security and social protection,” he stated.
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