Nigeria’s public finances came under intense strain in the first seven months of 2025 as the Federal Government spent more on debt servicing and salaries than it earned in total revenue, raising fresh concerns about fiscal sustainability and the crowding out of growth-enhancing investment.

Official data from the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), released by the Budget Office of the Federation, show that between January and July 2025, the government earned ₦13.67 trillion in revenue.

This fell far short of the prorated target of ₦23.85 trillion, resulting in a revenue shortfall of ₦10.19 trillion, or 42.7 per cent.

The figures contrast sharply with President Bola Tinubu’s public claim in September that Nigeria had met its 2025 revenue target by August and had stopped borrowing, suggesting that fiscal pressures remain acute.

Commenting on the figures, Dr Yemisi Ayinde, a researcher at Covenant University, Otta, described the situation as deeply troubling. “This is indeed very shocking, and one cannot really fathom what is truly happening,” he said.

Ayinde noted that when recurrent expenditure—especially debt service—absorbs almost all government revenue, capital spending becomes the immediate casualty.

He cited independent assessments by the Nigerian Economic Summit Group (NESG), which show that Nigeria’s debt-service-to-revenue ratio rose to 116.8 percent in 2024 and remained critically high at about 113 per cent in the first quarter of 2025.

“In strict public finance terms, this means debt servicing alone exceeded total federal revenue, forcing the government to rely on fresh borrowing merely to meet existing obligations—a classic sign of fiscal stress,” he said.

The revenue gap was driven largely by weak oil earnings. Oil revenue stood at ₦4.64 trillion, compared with an expected ₦12.25 trillion, representing a shortfall of 62.2 percent. Although some non-oil revenues showed resilience—Company Income Tax slightly exceeded target and Value Added Tax (VAT) receipts rose by about 11 per cent—these gains were outweighed by declines in customs revenue, federation levies and other oil-related inflows.

On the expenditure side, debt servicing and personnel costs alone exceeded total revenue. Debt service payments amounted to ₦9.81 trillion, while salaries and related personnel costs stood at ₦4.51 trillion. Combined spending of ₦14.32 trillion represented about 105 per cent of total revenue earned during the period.

The implication is stark: virtually all government income was absorbed by fixed recurrent obligations, leaving little or no fiscal space for development spending. Capital expenditure suffered the sharpest squeeze, with only ₦3.60 trillion spent, compared with a prorated allocation of ₦13.67 trillion—an underperformance of nearly 74 percent. Capital releases to ministries, departments and agencies were particularly weak.

The Budget Office partly attributed the poor capital outturn to the rollover of the 2024 budget into 2025, which created overlapping fiscal commitments and distorted spending execution. To address this, President Tinubu has asked the National Assembly to pass a 2024 Appropriation Repeal and Re-enactment Bill, proposing total spending of ₦43.56 trillion, aimed at 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 the debt-service-to-revenue ratio from about 97 per cent to below 50 per cent—these assertions 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-revenue ratio approaching or exceeding 100 per cent is widely regarded as fiscally unsustainable. It suppresses capital formation, constrains economic growth, and locks the government into a cycle where borrowing 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.

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