Nigeria recorded a fiscal deficit of about N5.7 trillion in the first six months of 2025, underscoring the persistent strain on public finances as revenue continues to lag far behind expenditure, even as government borrowing intensifies.
Data from the Q1 and Q2 2025 Budget Implementation Reports released by the Budget Office of the Federation show that while deficits came in below budgeted projections for both quarters, they were substantially higher than levels recorded in the same period of 2024. The figures point to a widening structural gap between what the government earns and what it spends, leaving borrowing as the primary tool for keeping the budget afloat.
In the first quarter of 2025, the Federal Government posted a fiscal deficit of N3.04 trillion. Although this was N481.81 billion, or 13.67 percent, lower than the projected quarterly deficit of N3.53 trillion, it more than doubled the N1.47 trillion deficit recorded in Q1 2024. Financing for the shortfall relied overwhelmingly on domestic borrowing, which accounted for N3.30 trillion, supplemented by N57.16 billion from privatization proceeds and N70.11 billion from multilateral and bilateral project-tied loans.
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The second quarter showed a slight moderation. The fiscal deficit for Q2 2025 stood at N2.66 trillion, which was N865.14 billion, or 24.52 percent, below the projected N3.53 trillion for the quarter. This also marked an improvement from the N3.17 trillion deficit recorded in Q2 2024. Even so, borrowing remained central to financing, with domestic sources contributing N2.80 trillion.
External financing played a much larger role in the second quarter than in the first. Multilateral and bilateral project-tied loans surged to N1.60 trillion, alongside N7.76 billion in privatization proceeds. The Budget Office said the Q2 deficit translated to a deficit-to-GDP ratio of 2.64 percent, which is within Nigeria’s 3 percent ceiling and below the ECOWAS convergence threshold.
Taken together, the two quarters bring Nigeria’s total fiscal deficit for the first half of 2025 to about N5.7 trillion. While the fact that the deficits were below projections offers some relief, the absolute size of the shortfall highlights the depth of the country’s fiscal imbalance. The government continues to spend far more than it earns, with limited progress in closing the revenue gap.
A major driver of the deficit remains weak revenue performance, particularly from oil. Despite year-on-year improvements, actual oil receipts fell far short of budget assumptions in both quarters. In Q1 2025, gross oil revenue stood at N4.55 trillion, representing a massive N8.21 trillion shortfall, or 64.35 percent, from the prorated quarterly target of N12.76 trillion. While this was N1.20 trillion higher than the N3.35 trillion recorded in Q1 2024, it still exposed the fragility of oil-dependent revenue planning.
Gross non-oil revenue in Q1 also underperformed, coming in at N4.71 trillion, which was N1.34 trillion, or 22.18 percent, below the quarterly estimate of N6.05 trillion. After statutory deductions, net distributable revenue to the federal, state, and local governments stood at N8.06 trillion, a shortfall of N8.79 trillion, or 52.16 percent, from projections.
In the second quarter, oil revenue edged up slightly to N4.77 trillion but remained deeply below expectations, missing the quarterly target by N7.99 trillion, or 62.62 percent. Compared with Q2 2024, oil revenue rose by N1.59 trillion, reflecting a 33.33 percent increase, but the improvement was not enough to meaningfully change the fiscal picture.
Non-oil revenue showed mixed signals. Gross non-oil revenue in Q2 rose to N4.46 trillion, recording a positive variance of N404.26 billion, or 6.68 percent, above projections. Even with that improvement, net distributable revenue for all tiers of government reached N9.85 trillion, still N7.01 trillion, or 41.58 percent, below budget expectations.
The Budget Office attributed the persistent revenue gaps to ongoing challenges in the oil sector, including production constraints, price volatility, and structural inefficiencies in revenue remittance. These weaknesses continue to undermine budget assumptions, even as oil revenue shows modest year-on-year gains.
The pressure on public finances is being compounded by rising expenditure demands, particularly debt servicing and recurrent spending. With borrowing increasingly skewed toward domestic sources, concerns are growing about debt sustainability, higher interest costs, and the potential crowding out of private sector credit if revenue mobilization does not improve in the second half of the year.
The situation also builds on an already fragile fiscal position. Nigeria’s fiscal deficit rose sharply to N13.51 trillion in 2024, exceeding targets and breaching the Fiscal Responsibility Act 2007 deficit-to-GDP limit, according to earlier reports. That backdrop makes the continued build-up of deficits in 2025 especially worrying for policymakers and investors alike.
While the government has leaned more on concessional external loans to manage financing costs and support capital projects, the data suggests that borrowing alone cannot resolve the underlying imbalance. Without stronger and more reliable revenue streams, particularly from oil and non-oil sources, fiscal pressures are likely to persist.
As the year winds down, the report of the second half of 2025 will test whether recent improvements in non-oil revenue can be sustained and whether oil sector reforms translate into better collections. For now, the first-half numbers paint a clear picture: Nigeria’s fiscal challenges remain deeply rooted, with deficits narrowing against projections but widening against economic reality.