By Seun Ibiyemi
Nigeria’s fiscal deficit widened to N5.7 trillion in the first half of 2025 as the federal government ramped up domestic borrowing to bridge revenue shortfalls and sustain capital expenditure.
The latest Budget Implementation Report (BIR) reveals that debt service costs surged to N9.22 trillion between January and June 2025, absorbing nearly the entire N10.18 trillion revenue generated during the period.
The revenue figure fell significantly short of the pro-rated target derived from the over N40 trillion projected for the full year.
Consequently, the government relied heavily on domestic debt markets to finance its operations. Total expenditure for the review period stood at N16.63 trillion against a pro-rated budget of N25.97 trillion, representing a 64 percent budget execution rate.
The report highlighted significant underperformance in oil revenue, which generated only N3.44 trillion due to crude oil production averaging below the budget benchmark of 2.12 million barrels per day. While non-oil revenue contributed N15.34 trillion accounting for 81.7 percent of total earnings, it remained insufficient to cover the rising cost of governance and debt obligations.
In the report’s foreword, the Minister of Budget and Economic Planning, Abubakar Atiku Bagudu, acknowledged the fiscal constraints but emphasised the administration’s resolve to maintain economic momentum.
“Despite fiscal pressures, the government prioritised capital investment,” Bagudu stated, adding that stronger domestic revenue mobilisation is critical to reducing the country’s dependence on borrowing.
The BIR warned that the elevated debt service-to-revenue ratio continues to constrain the fiscal space, limiting resources available for critical infrastructure and social welfare projects.
It called for urgent expenditure reprioritisation and aggressive revenue drive.
To address these challenges, the federal government is pursuing comprehensive tax reforms expected to take effect in January 2026. These reforms aim to raise the tax-to-GDP ratio from approximately 10 percent to nearly 18 percent over the next three years, thereby creating sustainable funding for capital investment and supporting the target of seven percent annual economic growth.