Nigeria’s 2025 budget shows debt and personnel costs surpass revenue, forcing major cuts to capital projects and highlighting fiscal vulnerability

Debt service and personnel costs have exceeded the Federal Government’s total revenue for the first seven months of 2025, the Budget Office of the Federation revealed on Wednesday, underscoring the strain on the nation’s finances.

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The 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper showed that between January and July, the government earned N13.67tn against a pro rata target of N23.85tn, leaving a shortfall of N10.19tn, or roughly 43 per cent.

The shortfall was largely due to a sharp drop in oil receipts, which fell 62.2 per cent below target, while dividends from state-linked entities also underperformed.

Despite modest gains from company income tax and Value Added Tax, the fiscal gap forced the government to overspend on debt service, which rose to N9.81tn, consuming 71.8 per cent of total revenue.

Combined with personnel costs of N4.51tn, recurrent spending alone accounted for roughly 105 per cent of revenue, leaving little room for capital investments.

Capital expenditure bore the brunt of the squeeze. Aggregate spending on projects from January to July was N3.60tn, only 26.3 per cent of the prorated N13.67tn budget.

Ministries, departments, and agencies received less than 10 per cent of their planned allocations, while donor-funded and project-tied loans fared relatively better.

The Budget Office linked the weak capital performance partly to the extended implementation of the 2024 budget, which is still financing ongoing projects.

The government has now directed that 70 per cent of the 2025 capital budget be carried over into 2026 to prioritise the completion of existing projects and manage spending pressures amid weak revenue inflows.

Economists expressed mixed views. Professor Sheriffdeen Tella of Olabisi Onabanjo University criticised the preparation of the 2026 budget when the 2025 budget had barely begun implementation, calling it premature.

Conversely, Dr Muda Yusuf of the Centre for the Promotion of Private Enterprise supported the rollover, saying it restores credibility and prevents continuous overlapping of budgets.

The MTEF document also revealed that non-debt recurrent expenditure fell 26 per cent below target, pensions were underfunded by half, and overheads for ministries were sharply reduced, while debt service overshot projections by 17.5 per cent.

The analysis highlights Nigeria’s fiscal vulnerability, particularly the economy’s reliance on oil revenue, even as non-oil revenues gradually increase their contribution to the Federation Account.

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The report warns that without structural fiscal reforms, capital projects critical to health, education, infrastructure, and social safety nets will continue to face deep constraints.