The Federal Government spent nearly three-quarters of its total revenue on debt servicing in the first seven months of 2025, underscoring the mounting strain Nigeria’s debt obligations are placing on public finances.
An analysis of the 2026–2028 Medium-Term Expenditure Framework (MTEF) 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 ₦13.67 trillion.
Out of this amount, ₦9.81 trillion was used to service domestic and external debts—meaning 71.8% of total revenue was consumed by debt servicing alone.
When personnel costs of ₦4.51 trillion for ministries, departments and agencies (MDAs) and government-owned enterprises are added, total spending on debt service and wages rose to ₦14.32 trillion, exceeding total revenue for the period.
This implies that debt servicing and salaries alone accounted for about 105% of Federal Government income in the first seven months of the year.
What the data shows
Budget Office figures indicate that the revenue squeeze was driven largely by a sharp decline in oil earnings. Between January and July, oil revenue stood at ₦4.64 trillion, far below the pro rata target of ₦12.25 trillion, resulting in a shortfall of ₦7.62 trillion, or 62.2%.
Dividends from entities such as Nigeria Liquefied Natural Gas (NLNG) and development finance institutions also fell significantly short, generating just ₦104.64 billion compared with a projected ₦428.71 billion.
Some non-oil revenue lines recorded modest gains. Company Income Tax yielded ₦2.54 trillion, slightly above the pro rata estimate of ₦2.49 trillion, while Value Added Tax (VAT) outperformed expectations, with the Federal Government’s share rising to ₦630.10 billion, compared with a target of ₦567.54 billion, an increase of about 11%.
However, these gains were outweighed by weaknesses elsewhere. Customs revenue declined to ₦988.29 billion, about 39.1% below its ₦1.62 trillion target. Federation Account levies plunged by 70.1% to ₦75.08 billion, while oil price royalties recorded zero inflow during the period.
The MTEF noted that while VAT and the Electronic Money Transfer Levy provided some relief, their overperformance was insufficient to offset the scale of oil revenue losses.
Overall, aggregate revenue of ₦13.67 trillion fell well short of the pro rata target of ₦23.85 trillion, leaving a revenue gap of ₦10.19 trillion, or 42.7%, in the first seven months of 2025.
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 ₦20.40 trillion between January and July, compared with a pro rata target of ₦32.08 trillion, representing a shortfall of 36.4%.
Recurrent expenditure remained largely on track, with actual spending of ₦15.68 trillion, just 3.7% below the pro rata target of ₦16.28 trillion.
However, within recurrent spending, non-debt items were squeezed. Non-debt recurrent expenditure came in at ₦5.87 trillion, down 26% from the expected ₦7.93 trillion.
Personnel costs for MDAs totaled ₦3.91 trillion, about 11.7% below target, while personnel spending by government-owned enterprises matched projections at ₦593.49 billion. Pension and gratuity payments were severely underfunded at ₦445.67 billion, barely half of the ₦842.34 billion expected.
By contrast, debt servicing exceeded budget estimates. The Federal Government spent ₦9.81 trillion on debt service during the period, compared with a pro rata target of ₦8.35 trillion, an overshoot of 17.5%.
Domestic debt service amounted to ₦4.65 trillion, 10.9% above target, while foreign debt service rose to ₦5.07 trillion, exceeding projections by 28.7%. Contributions to the sinking fund stood at ₦96.70 billion, far below the ₦220.09 billion budgeted.
Capital spending crowded out
Capital expenditure bore the brunt of the fiscal strain. Total capital spending stood at just ₦3.60 trillion, far below the pro rata budget of ₦13.67 trillion, representing a shortfall of 73.7%.
Capital releases to MDAs were particularly weak, with only ₦834.80 billion released out of a ₦10.81 trillion target.
The Budget Office attributed the weak capital outturn partly to the extension of the 2024 budget, noting that about ₦2.23 trillion from the 2024 capital vote was still being financed in 2025 following approval by the National Assembly to extend implementation to December.
The document recalled that in 2024, total debt service stood at ₦13.12 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.
