The Federal Government recorded a fiscal deficit of ₦2.66 trillion in the second quarter of 2025, the Budget Office of the Federation has disclosed.
According to data contained in the Second Quarter and Half-Year 2025 Budget Implementation Report, the deficit was financed largely through domestic borrowing during the period under review.
The report showed that total revenue stood at ₦5.97 trillion, while expenditure rose to ₦8.63 trillion, resulting in the deficit.
The Budget Office noted that although budget execution continued to face setbacks due to weak revenue performance, the government still prioritised the settlement of non-discretionary obligations, including debt servicing and personnel costs.
It stated, “The Federal Government continued to prioritise and meet its non-discretionary expenditure requirements even as budget execution suffered setbacks due to poor, but improving, revenue outcomes.”
Oil sector performance remained a major drag on revenue, as average crude oil production stood at 1.68 million barrels per day in Q2, significantly below the budget benchmark of 2.12mbpd.
Aggregate Federal Government revenue between April and June 2025 stood at ₦5.23 trillion, representing 58.45 per cent of the prorated target.
Oil revenue accounted for ₦1.50 trillion, or 28.50 per cent of total revenue, but fell short of its target by 71.50 per cent, reflecting production challenges and price volatility.
In contrast, non-oil revenue performance exceeded projections, standing at ₦8.90 trillion, which represented 85.60 per cent of total revenues.
The improved outcome was attributed to stronger collections from Company Income Tax, Value Added Tax, Electronic Money Transfer Levy, and Education Tax (TETFUND).
The report said the non-oil revenue growth validated ongoing reforms, particularly in compliance enforcement, customs automation and improved remittance of independent revenues.
Total aggregate expenditure, including spending by Government-Owned Enterprises and project-tied loans, stood at ₦8.63 trillion, compared to a prorated target of ₦13.75 trillion.
Capital releases to Ministries, Departments and Agencies were put at ₦393.86 billion, while non-debt recurrent expenditure amounted to ₦2.72 trillion in the quarter.
However, debt service gulped ₦4.44 trillion, exceeding projections by 24.10 per cent, largely due to rising domestic debt obligations.
The Minister of Budget and Economic Planning, Senator Abubakar Bagudu, said despite mounting fiscal pressures, the Federal Government remained focused on capital investment and strengthening domestic revenue mobilisation to ensure long-term fiscal sustainability.
Bagudu disclosed that the economy recorded a real GDP growth of 4.23 per cent during the review period, driven mainly by the services and non-oil sectors.
He added that although inflation remained elevated, it moderated to 22.22 per cent, while external reserves declined to $37.82bn, reflecting persistent revenue shortfalls from both oil and non-oil sources.
He noted that oil revenue volatility continued to expose public finances to production and pricing shocks, while structural weaknesses and lower global prices constrained fiscal outcomes.
Despite the gains in non-oil revenue, the report warned that the debt service-to-revenue ratio remained elevated, leaving the government with limited fiscal space.
It stressed the need for urgent revenue mobilisation and expenditure reprioritisation to restore fiscal balance.
The Budget Office admitted that cash management bottlenecks, particularly delays in bottom-up cash planning, continued to slow project execution and increase cost risks.
Among other measures, the report recommended:
- Aligning oil production assumptions with verifiable capacity
- Adopting conservative oil price benchmarks to boost fiscal resilience
- Deepening compliance enforcement and rationalising tax expenditures
- Accelerating the rollout of e-customs and optimising independent revenue remittance
It also called for the institutionalisation of value-for-money audits, prioritisation of high-impact projects, and reforms in debt management to reduce the debt service-to-revenue ratio to sustainable levels in 2025 through revenue growth and concessional financing.
The report recalled that the 2025 Appropriation Act, titled “Budget of Restoration: Securing Peace, Rebuilding Prosperity,” is anchored on stabilising the economy, improving livelihoods and laying the foundation for sustainable long-term growth under the Renewed Hope Agenda.