Nigeria Records N5.7trn Deficit As Revenue Drops To N10.18trn In H1

Nigeria closed the first half of 2025 with a fiscal deficit of N5.7 trillion after government revenue underperformed budget expectations, according to the Budget Implementation Report (BIR) for the period.

The report showed that aggregate revenue between January and June stood at N10.18 trillion—barely a quarter of the more than N40 trillion projected for the full year—underscoring persistent pressure on public finances despite ongoing reform efforts.

In a foreword to the report, the Minister of Budget and Economic Planning, Abubakar Atiku Bagudu, said revenue weaknesses remained evident across both oil and non-oil streams, even as the government sustained capital spending commitments.

He noted that fiscal pressures had reinforced the need to deepen domestic revenue mobilisation to safeguard long-term sustainability.

While overall earnings lagged projections, non-oil income continued to dominate the revenue mix. The BIR indicated that non-oil sources accounted for 81.7 per cent of total receipts, generating N15.34 trillion during the review period and outperforming expectations.

The performance, according to the report, reflected the impact of recent administrative reforms, including improved compliance enforcement, customs automation and stricter remittance of independent revenues.
In contrast, oil revenue remained a major drag on fiscal outcomes. Crude oil earnings amounted to N3.44 trillion in the first half of the year, falling sharply short of targets by 63.1 percent in the first quarter and 71.5 per cent in the second quarter.

Average daily crude oil production ranged between 1.60 million and 1.68 million barrels per day, well below the budget benchmark of 2.12 million barrels per day, weakening oil-related inflows and external reserve accumulation.

The report attributed the shortfall largely to structural challenges in the upstream sector, including high production costs that are uncompetitive globally and persistent defaults on royalties and other statutory payments. It added that lower-than-expected output and prices played a relatively smaller role.

On the spending side, government expenditure continued to exceed revenue. Total spending in the first half reached N16.63 trillion against a prorated annual estimate of N25.97 trillion, translating to an execution rate of 64 per cent.

To bridge the financing gap, the government relied heavily on domestic borrowing, pushing debt service obligations to N9.22 trillion within the period—almost equal to total revenue earned. The BIR warned that the elevated debt service-to-revenue ratio was constraining fiscal space and limiting resources available for infrastructure and other development priorities.

Authorities, however, said steps are being taken to restore balance to public finances. The government is targeting a reduction in the debt service burden in 2025 through stronger revenue growth and increased access to concessional financing.

As part of broader revenue-enhancement measures, Nigeria is also preparing to overhaul its tax framework. New tax rules scheduled to take effect from January 2026 are expected to lift tax revenue from about 10 per cent of gross domestic product to roughly 18 per cent within three years, creating room for higher capital investment to support the country’s targeted annual growth of seven per cent.