N20.44trn Mid-year Revenue Exposes Federal Fiscal Strains, Analysts Warn

Despite hitting N20.44 trillion in mid-year revenue, the federal government faces mounting fiscal pressures, analysts have warned, as shortfalls in oil earnings and rising debt servicing costs threaten budget sustainability

Analysts at Cowry Assets Management Company, in a mid-year 2025 budget review, noted that, actual revenue collections by mid-year, stood at about N20.44 trillion, leaving a shortfall of roughly N4 trillion, already signals fiscal strains.

To them, by half-year, the budget was already showing signs of strain as revenue underperformance, rigid recurrent spending and rising debt service deepened the gap between fiscal plans and reality.

The aggregate federal government revenue, budgeted at N48.97 trillion for the full year, translated to a half-year benchmark of N24.48 trillion. However, actual collections by mid-year stood at about N20.44 trillion, N4 trillion lower than the initial projection.

According to Cowry Assets, the gap in revenue performance set the tone for the rest of the fiscal year, underscoring persistent structural weaknesses in revenue mobilisation.

Independent revenue, which was expected to play a more strategic role, further highlighted this challenge. Of the N7.99 trillion projected for the year, the half-year benchmark was N3.99 trillion, but actual inflows were estimated at N3.58 trillion.

While this performance did not amount to a collapse, the analysts said it reinforced a familiar pattern of underwhelming independent revenue, despite its growing importance to fiscal sustainability.

Oil revenue offered limited relief. With an annual projection of N6.08 trillion and a half-year target of N3.04 trillion, actual receipts came in at about N2.94 trillion. Cowry Assets analysts observed that although oil earnings were close to target, they were still marginally behind and insufficient to offset broader revenue weaknesses.

Total expenditure was approved at N34.35 trillion, with a half-year benchmark of N17.18 trillion. Actual spending by mid-year stood at approximately N16.22 trillion. However, the analysts cautioned that the composition of spending, rather than the headline figure, raised deeper concerns.

Recurrent non-debt expenditure, budgeted at N13.99 trillion for the year with a half-year allocation of N6.99 trillion, had already reached about N6.23 trillion. This, they said, shows that recurrent costs are moving almost automatically towards their ceiling, regardless of revenue performance.

Personnel costs further illustrated the rigidity of government spending. Against an annual provision of N4.08 trillion and a half-year benchmark of N2.04 trillion, actual spending hit about N1.90 trillion by mid-year. Pension obligations followed a similar trajectory, reaching N1.42 trillion against a half-year budget of N1.72 trillion.

“These numbers confirm that salaries and pensions continue to dominate fiscal space, leaving limited room for adjustment when revenues fall short,” the Cowry Assets analysts said.

Debt service remained the most troubling pressure point in the budget. Budgeted at N8.25 trillion for the year, with a half-year target of N4.12 trillion, actual debt service payments had already climbed to about N4.73 trillion by mid-year. This means debt service exceeded its half-year benchmark, consuming more revenue than planned.

The analysts warned that, this trend reinforces the uncomfortable reality that debt obligations are growing faster than the revenue base, further constraining fiscal flexibility.

Capital expenditure, on the other hand, underperformed its benchmark, but not necessarily due to fiscal discipline. Of the N8.32 trillion approved for the year, the implied half-year benchmark was N4.16 trillion, yet actual capital releases were estimated at N3.28 trillion.

Cowry Assets noted that, the shortfall reflects slow execution rather than savings, pushing the economic impact of capital projects into the second half of the year and increasing the risk of rushed spending later.

Financing figures completed the fiscal picture. Total financing was projected at N9.46 trillion for the year, with N4.73 trillion expected by mid-year. Actual financing reached about N4.85 trillion, slightly above target, indicating that borrowing is already compensating for revenue weakness and elevated debt service costs.

Overall, the analysts concluded that the half-year numbers expose a budget running on momentum rather than balance. With revenues lagging by trillions of naira, recurrent spending moving largely on autopilot, debt service overrunning its benchmark and financing stepping in earlier than planned, the risks to fiscal sustainability are rising.

They warned that, unless revenue collection accelerates sharply in the second half of the year and spending discipline tightens, the 2025 budget could close the year leaning even more heavily on borrowing, leaving little room to argue that the current pressures are temporary.