Nigeria’s Budget Deficit Reduces by 16% to N2.66 trn in Q2
The federal government posted a 16% year-on-year decline in fiscal deficit, settling at N2.66 trillion in Q2; financed entirely through domestic borrowing in the second quarter of the year, according to the Budget Office of the Federation (BoF).
Data contained in the Second Quarter and Half-Year 2025 Budget Implementation Report (BIR) by the BoF noted that the deficit was financed through domestic borrowing in the quarter under review.
Total budget deficit on record was about 25% below FG’s projection of N3.58 trillion for the period. Nigeria’s N2.66 trillion fiscal gap translates to a deficit-to-GDP ratio of 2.64 percent, which is within the 3 percent threshold for the country and the ECOWAS convergence criteria.
The Q2 2025 fiscal deficit was also lower than the N3.17 trillion deficit recorded in the second quarter of 2024, financed through domestic borrowing of N2.80 trillion, privatization proceeds of N7.76 billion and multilateral/Bi-lateral Project-tied loans of N1.60 trillion in Q2
Meanwhile, total federal government revenue was put at N5.97 trillion, while expenditure peaked at N 8.63 trillion, resulting in a deficit. Budget office said revenue generation remains the main fiscal challenge of the Federal Government.
According to the report, the federal government continued to prioritise and meet its non-discretionary expenditure requirements even as the budget execution continued to suffer setbacks due to poor but improving revenue outcomes.
In Q2, oil production averaged 1.68 mbpd, below the budget benchmark of 2.12 mbpd, with revenue implications. Aggregate FGN Revenue stood at N5.23 trillion or 58.45 per cent of prorated target between April-June 2025.
Oil revenue stood at N1.50 trillion, representing 28.50 per cent of total revenues but fell short of target by 71.50 per cent. Non-oil revenue stood at N8.90 trillion, representing 85.60 per cent of total revenues, exceeding projections due to improved CIT, VAT, EMTL, and Education Tax (TETFUND).
On revenue performance, aggregate expenditure (including Government-owned Enterprises (GOEs) and project-tied loans stood at N8.63 trillion compared to prorated N13.75 trillion.
Capital releases to MDAs stood at N393.86 billion while non-debt recurrent expenditure was N2.72 trillion in Q2. Debt service gulped N4.44 trillion, exceeding projection by 24.10 per cent, driven by domestic debt obligations.
Minister of Budget and Economic Planning, Senator Abubakar Bagudu, said despite fiscal pressures, the government prioritised capital investment, highlighted by the imperative to strengthen domestic revenue mobilisation and ensure fiscal sustainability.
Bagudu stated that the economy recorded a real GDP growth of 4.23 per cent in the review period, driven primarily by the services and non-oil sectors, while inflation remained elevated at the time, though trended downward to 22.22 per cent, and external reserves declined to $37.82 billion amid persistent revenue shortfalls in both oil receipts and non-oil revenues.
Oil revenue volatility continued to expose fiscal outcomes to production and pricing shocks, structural underperformance amid lower market prices.
He said the non-oil revenue growth validated recent administrative reforms, particularly in compliance enforcement, customs automation, and independent revenue remittance.
Nevertheless, debt service-to-revenue ratio remained elevated with constrained fiscal space requiring urgent revenue mobilisation and expenditure reprioritisation. Furthermore, the report admitted that cash management bottlenecks, including bottom-up cash planning delays, continued to slow project execution and raise project cost risks.
Among other recommendations, the report called for alignment of oil production assumptions with verifiable capacity, adoption of conservative price benchmarks to build fiscal resilience against external shocks as well as deepen compliance enforcement, rationalise tax expenditures, accelerate e-customs rollout, and optimise independent revenue remittance.
It further advocated the institutionalisation of value-for-money audits; and prioritising high-impact projects with measurable economic returns.
The report stated that the debt management regime should target reduction in debt service-to-revenue ratio to sustainable thresholds in 2025 through revenue growth and concessional financing strategies, as well as streamline cash release mechanisms to improve predictability and project delivery timelines.
The 2025 budget was titled “Budget of Restoration: Securing Peace, Rebuilding Prosperity,” and it focused on stabilising the economy, improving lives, and laying a foundation for long-term growth under the Renewed Hope Agenda. Customs: Tincan Island Command Records N1.57trn Revenue in 2025
