The Federal Government spent nearly three-quarters of its total revenue on debt servicing in the first seven months of 2025, highlighting the intensifying pressure Nigeria’s debt obligations are placing on public finances.
An analysis of the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper released by the Budget Office of the Federation shows that between January and July 2025, the Federal Government generated total revenue of N13.67 trillion.
Out of this amount, N9.81 trillion was used to service domestic and external debts, meaning 71.8% of total revenue was absorbed by debt servicing alone.
When personnel costs of N4.51 trillion for ministries, departments and agencies as well as government-owned enterprises are added, total spending on debt service and wages rose to N14.32 trillion.
This exceeded total revenue for the period, implying that debt servicing and salaries alone accounted for about 105% of Federal Government income.
What the data is saying
The Budget Office data shows that the revenue shortfall was driven largely by a steep decline in oil earnings. Between January and July, oil revenue stood at N4.64 trillion, far below the pro rata target of N12.25 trillion, resulting in a shortfall of N7.62 trillion or 62.2%.
Dividends from entities such as Nigeria Liquefied Natural Gas and development finance institutions also underperformed significantly, yielding just N104.64 billion compared with a projected N428.71 billion.
Some non-oil tax lines recorded modest gains. Company Income Tax generated N2.54 trillion, slightly above the pro rata estimate of N2.49 trillion. Value Added Tax also outperformed, with the Federal Government’s share rising to N630.10 billion against a target of N567.54 billion, an increase of about 11%.
These gains were outweighed by weaknesses elsewhere. Customs revenue declined to N988.29 billion, about 39.1% below its N1.62 trillion target. Federation Account levies fell sharply by 70.1% to N75.08 billion, while oil price royalties recorded no inflow during the period.
The MTEF noted that while VAT and Electronic Money Transfer Levy provided some relief, their overperformance was insufficient to offset the scale of oil revenue losses.
Overall, the Federal Government recorded aggregate revenue of N13.67 trillion against a pro rata target of N23.85 trillion, leaving a revenue gap of N10.19 trillion or 42.7% in the first seven months of the year.
Debt service overshoots budget as capital spending suffers
On the expenditure side, total Federal Government spending, including government-owned enterprises and project-tied loans, stood at N20.40 trillion between January and July, compared with a pro rata target of N32.08 trillion, reflecting a shortfall of 36.4%.
Recurrent expenditure remained largely on track. Actual recurrent spending amounted to N15.68 trillion, just 3.7% below the pro rata target of N16.28 trillion.
However, within recurrent items, non-debt spending was squeezed. Non-debt recurrent expenditure stood at N5.87 trillion, down 26% from the expected N7.93 trillion.
Personnel costs for MDAs came in at N3.91 trillion, about 11.7% below target, while personnel costs for government-owned enterprises matched the pro rata figure of N593.49 billion. Pension and gratuity payments were severely underfunded at N445.67 billion, barely half of the N842.34 billion expected.
By contrast, debt servicing exceeded budget estimates. The Federal Government spent N9.81 trillion on debt service during the period, compared with a pro rata target of N8.35 trillion, representing an overshoot of 17.5%.
Domestic debt service amounted to N4.65 trillion, 10.9% above target, while foreign debt service rose to N5.07 trillion, exceeding projections by 28.7%.
The sinking fund recorded N96.70 billion, significantly below the N220.09 billion budgeted.
Capital expenditure bore the brunt of the fiscal strain. Total capital spending stood at N3.60 trillion, far below the pro rata budget of N13.67 trillion, translating to a shortfall of 73.7%.
Capital releases to MDAs were particularly weak, with just N834.80 billion released out of a N10.81 trillion target.
The Budget Office attributed the weak capital outturn partly to the extension of the 2024 budget, noting that about N2.23 trillion from the 2024 capital vote was still being financed in 2025 following the National Assembly’s approval to extend implementation to December.
The document recalled that in 2024, total debt service cost N13.12 trillion, equivalent to 77.5% of Federal Government revenue. The 2025 figures suggest that debt servicing pressures remain elevated, continuing to crowd out capital investment and constraining fiscal space for critical sectors such as health, education and infrastructure.
