Federal Government debt repayments exceeded the 2025 amended budget allocation by N1.90tn in the first nine months of the year, according to fresh data released by the Budget Office of the Federation.
The 2025 Third Quarter Budget Implementation Report showed that total debt-related payments reached N12.63tn between January and September. This figure was higher than the prorated budget provision of N10.74tn, representing an overrun of N1.90tn or 17.65 per cent.
The increase was driven mainly by debt service obligations. Debt service payments stood at N12.52tn during the period, exceeding the prorated allocation of N10.45tn by N2.07tn. This translates to excess spending of 19.8 per cent above budget.
A breakdown of the figures showed that domestic debt service consumed N6.23tn. This exceeded the budgeted provision of N5.39tn by N832.42bn. Foreign debt service also rose significantly, reaching N6.30tn against an allocation of N5.06tn, resulting in an excess of N1.24tn.
The report highlighted the growing pressure of debt obligations on government finances. It revealed that 67.2 per cent of the Federal Government’s retained revenue of N18.63tn was spent on debt servicing during the first three quarters of 2025.
When sinking fund payments were included, debt-related obligations accounted for approximately 67.8 per cent of total retained revenue. This means that for every N100 earned by the Federal Government during the period, about N67 was used to service debts, leaving only N33 for salaries, capital projects, overhead costs and other government responsibilities.
Meanwhile, government revenue continued to underperform. Aggregate Federal Government revenue stood at N18.63tn, falling short of the N30.67tn target for the first nine months by N12.03tn or 39.24 per cent.
In the third quarter alone, revenue generation amounted to N7.70tn. This was below the quarterly target of N10.22tn by N2.52tn, representing a shortfall of 24.64 per cent.
The Budget Office attributed the weak performance largely to persistent oil revenue challenges, despite stronger collections from non-oil sources.
Rising debt obligations also affected capital expenditure. Total capital spending stood at only N3.10tn during the first nine months of the year, compared to the budgeted N17.58tn for the same period.
The figures showed that actual debt-related payments were more than four times higher than capital expenditure. This reflects the extent to which debt servicing continues to crowd out spending on infrastructure and development projects.
According to the report, the debt service-to-revenue ratio remained elevated throughout the period. The agency warned that fiscal space remained constrained and called for urgent measures to improve revenue generation and rationalise expenditure.
Overall Federal Government expenditure stood at N24.66tn, below the prorated budget estimate of N41.24tn by N16.58tn. However, the composition of spending indicated that debt obligations remained a priority over capital releases.
The fiscal deficit for the first three quarters was recorded at N6.03tn, lower than the prorated target deficit of N10.58tn. Financing items totalled N12.07tn, supported largely by multilateral and bilateral project-tied loans of N4.81tn and domestic borrowing of N7.08tn.
The data suggests that Nigeria’s major fiscal challenge remains weak revenue generation rather than excessive spending alone. Rising debt costs continue to absorb a significant portion of government income, reducing the resources available for investment in critical infrastructure.
As fiscal pressures persist, the Federal Government is considering refinancing some of its expensive debt obligations while exploring additional funding sources to bridge the budget gap.
Speaking in an interview with Bloomberg TV on Wednesday, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said current market conditions present opportunities for refinancing and raising development funding.
“We think that this timing is good for us to be able to maybe even refinance some of our expensive past debts, but also to raise more funding for our development at this critical time,” Oyedele said.
He noted that stronger investor confidence and favourable market conditions had improved Nigeria’s financing prospects.
The improved outlook has been supported by rising global crude oil prices following geopolitical tensions involving the United States, Israel and Iran. As a major oil producer, Nigeria has benefited from stronger export earnings, while investors have become more optimistic about the country’s ability to meet its financial obligations.
Oyedele disclosed that the government is exploring multiple options to finance a budget deficit estimated at N30tn this year. These options include concessionary loans and continued engagement with multilateral institutions such as the World Bank.
He added that international investor interest in Nigeria had increased due to ongoing fiscal and tax reforms introduced by the administration of President Bola Tinubu.
Despite the temporary relief from higher oil prices, analysts warn that inflationary pressures could create additional challenges for economic management. The situation has already contributed to the Central Bank of Nigeria’s decision to pause its interest-rate easing cycle.
With debt obligations continuing to consume a large share of government revenue, concerns remain about the ability of the Federal Government to fund critical infrastructure and social development programmes.
However, Oyedele recently emphasised that Nigeria can no longer depend heavily on borrowing to finance development. He stressed the need for a sustainable fiscal system capable of supporting key sectors of the economy while reducing dependence on debt.
