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By Uche Usim
Nigeria’s finances came under intense pressure in the first half of 2025, with the government spending about ₦5.7 trillion more than it earned, as revenue slumped and expenses ballooned.
Data from the Q1 and Q2 2025 Budget Implementation Reports released by the Budget Office of the Federation show that although the deficits came in below budgeted projections, they were clearly higher than levels recorded in the corresponding period of 2024. The figures underscore the government’s growing dependence on borrowing, both domestic and external, to close the widening gap between revenue and expenditure.
In the first quarter (Q1) of 2025, the fiscal deficit stood at ₦3.04 trillion. While this was ₦481.81 billion, or 13.67 per cent, lower than the projected quarterly deficit of ₦3.53 trillion, it represented a sharp deterioration from the ₦1.47 trillion deficit recorded in Q1 2024. The shortfall was largely financed through domestic borrowing of ₦3.30 trillion, alongside ₦57.16 billion from privatisation proceeds and ₦70.11 billion from multilateral and bilateral project-tied loans.
The second quarter (Q2) also closed with a sizable deficit of ₦2.66 trillion, which was ₦865.14 billion, or 24.52 per cent, below the projected ₦3.53 trillion for the period. This performance marked an improvement over the ₦3.17 trillion deficit posted in Q2 2024. Nevertheless, the scale of the shortfall again reflected persistent structural weaknesses in Nigeria’s fiscal framework, particularly the government’s limited ability to grow revenues in line with expenditure commitments.
According to the Budget Office, the Q2 deficit translated to a deficit-to-GDP ratio of 2.64 per cent, remaining within Nigeria’s 3 per cent ceiling and the ECOWAS convergence benchmark. However, financing patterns raised fresh concerns. Domestic borrowing accounted for N2.80 trillion of the Q2 deficit, while external funding played a significantly larger role than in the previous quarter. Multilateral and bilateral project-tied loans surged to N1.60 trillion, complemented by N7.76 billion in privatisation receipts.
The increased reliance on concessional external loans highlights the government’s strategy of managing borrowing costs while continuing to fund capital projects and meet recurrent obligations. Still, analysts warn that sustained borrowing—particularly from domestic markets—could intensify debt servicing pressures, elevate interest costs, and crowd out private sector credit if revenue mobilisation does not improve.
Combined, the Q1 and Q2 outcomes bring Nigeria’s total fiscal deficit for the first half of 2025 to about N5.7 trillion, reinforcing concerns about the underlying imbalance between revenues and expenditures. While the fact that deficits remained below projections offers some reassurance, the broader trend points to limited fiscal headroom.
These developments come against the backdrop of a sharp fiscal deterioration in 2024, when Nigeria’s deficit reportedly rose to N13.51 trillion, breaching targets and exceeding the Fiscal Responsibility Act (FRA) 2007 deficit-to-GDP threshold. With the Budget Office projecting quarterly deficits of N2.29 trillion, excluding government-owned enterprise revenues and external project-tied loans—the pressure is now on the government to strengthen revenue collection and rein in spending in the second half of 2025 to avoid deeper fiscal stress.
