Nigeria’s Fiscal Gap: H1 2025 Deficit Hits ₦5.7 Trillion
Nigeria’s financial health faced significant pressure in the first half of 2025, recording a fiscal deficit of ₦5.7 trillion. While this figure is slightly better than the government’s own ambitious projections, it marks a sharp increase compared to the same period in 2024, highlighting a persistent struggle to match rising expenditures with actual revenue.
According to the latest Budget Implementation Reports released by the Budget Office of the Federation on December 22, 2025, the gap is being bridged almost entirely through heavy borrowing.
Quarterly Breakdown: Q1 vs. Q2 2025
The deficit showed a slight “narrowing” in the second quarter, but the overall half-year total remains a concern for debt sustainability.
| Period | Actual Deficit | Budgeted Projection | Financing Source |
| Q1 2025 | ₦3.04 Trillion | ₦3.53 Trillion | ₦3.30 Trillion Domestic Borrowing |
| Q2 2025 | ₦2.66 Trillion | ₦3.53 Trillion | ₦2.80 Trillion Domestic Borrowing |
| Total H1 | ₦5.70 Trillion | ₦7.06 Trillion | Mainly Domestic & Project-tied Loans |
The Debt Service Trap: Where the Money is Going
While the deficit is technically within the 3% Deficit-to-GDP ratio (standing at 2.64% in Q2), a deeper look at the numbers reveals a massive “Debt Service” burden.
Q2 Debt Service: In the second quarter alone, the government spent ₦4.44 trillion on debt servicing—exceeding projections by 24.10%.
Revenue vs. Debt: Revenue in Q2 stood at ₦5.97 trillion, meaning nearly 74% of revenue was consumed just by paying interest on loans.
Capital Lag: Because debt and recurrent costs (salaries/overhead) take priority, capital expenditure (infrastructure) has languished, with only ₦393.86 billion released for projects in Q2.
Why the Deficit is Growing
Two main factors are preventing the government from closing this gap:
Oil Revenue Shortfalls: Daily production averaged 1.68 million barrels (mbpd) in Q2, falling short of the 2.12 mbpd budget target.
Structural Spending: Recurrent non-debt expenditure remains high at ₦2.72 trillion per quarter, making it difficult to cut costs without significant civil service reform.
Recent Update: The 2026 Outlook
As of December 19, 2025, President Bola Tinubu presented the 2026 “Restoration” Budget to the National Assembly. Here is how the year is ending:
Year-to-Date Performance: As of Q3 2025, Nigeria generated ₦18.6 trillion in revenue (61% of target) and spent ₦24.66 trillion.
2026 Proposal: A massive ₦58.18 trillion budget has been proposed for next year, with a projected deficit of ₦23.85 trillion.
The Silver Lining: Inflation has successfully moderated for eight consecutive months, dropping to 14.45% in November 2025, providing some much-needed macroeconomic stability.
What This Means for You
Crowding Out: The government’s heavy reliance on domestic borrowing (₦6.1 trillion in H1 alone) makes it harder and more expensive for local businesses and individuals to get bank loans.
Infrastructure Delays: With only 17.7% of the 2025 capital budget released as of Q3, major road and power projects are likely to be rolled over into 2026.
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