Nigeria continued to suffer severe fiscal pressure in the third quarter of 2025 as the country’s oil revenue target fell by N6.69 trillion. This is even as the federal government released only N16.08 billion to MDAs for capital projects during the period.
This is contained in the reviewed 2O25 third quarter budget implementation report just released by the Budget Office of the Federation (BOF).
The report shows the widening gap between the government’s ambitious development spending plans and its ability to mobilise the funds required to finance them.
According to the report which is also termed, Reviewed 2O25 Third Quarter Macroeconomics and Financial Analysis,
net revenue available for distribution among the three tiers of government was N10.29 trillion in the third quarter representing a shortfall of N6 57 trillion or 38.98 per cent compared to the quarterly projection of N16.86 trillion.
The oil sector accounted for virtually all of the revenue gap, with N4.18 trillion oil revenue accruing to the Federation Account, falling N6.69 trillion, or 61.53 per cent below the N10.88 trillion prorate projected quarterly gross oil revenue in the 2025 Budget. The figure was, however, N0.18 trillion or 4.50 per cent above the actual gross oil revenue of N4.00 trillion generated in the corresponding period of 2024.
By contrast, non-oil revenue performed relatively strongly, with a gross accruals of N6.52 trillion in the quarter under review signifying an increase of N468.58 billion, or 7.74 per cent above the quarterly estimate of N6.05 trillion.
The development highlights the continued vulnerability of Nigeria’s public finances to fluctuations in crude oil production and prices, despite recent improvements in non-oil revenue collection.
The Budget Office said the Federal Government generated aggregate revenue of N7.70 trillion between July and September 2025, representing 75.16 per cent of the prorated target.
Of this amount, oil revenue accounted for N2.45 trillion, or 31.87 per cent, while non-oil revenue contributed N5.25 trillion, representing 68.18 per cent.
The report attributed the stronger non-oil revenue performance to improvements in Value Added Tax, Electronic Money Transfer Levy, independent revenue and Education Tax collections.
However, oil production averaged 1.64 million barrels per day during the quarter, significantly below the 2.12 million barrels per day benchmark used in the budget.
The production shortfall further weakened the government’s ability to meet its oil revenue projections.
The situation is particularly significant because the 2025 budget was designed around the government’s objective of restoring economic stability, rebuilding prosperity, investing in critical infrastructure, reducing poverty and diversifying the economy.
Yet, the revenue constraints appear to be limiting the resources available to translate those priorities into actual projects.
The report shows that the Federal Government had dedicated N16.76 trillion to capital spending in the 2025 amended budget, including expenditure on roads, power, housing, rail, aviation, physical security and food security.
But only N16.08 billion was released to MDAs and cash-backed for their capital projects and programmes during the third quarter.
The Budget Office explained that capital releases were made in tranches, depending on the availability of resources, government priorities and requests submitted by MDAs under the bottom-up cash release approach.
It also identified cash-management bottlenecks, including delays in bottom-up cash planning, as factors slowing project execution and creating risks of higher project costs.
The disparity between the size of the capital budget and actual releases raises fresh questions about the implementation capacity of the Federal Government, particularly at a time when infrastructure deficits and high living costs remain major concerns.
The report itself warned that improving revenue collection in subsequent quarters would be critical to successful execution of the 2025 budget.
Meanwhile, the Federal Government spent N8.03 trillion during the quarter, 41.57 per cent below the prorated quarterly budget of N13.75 trillion but 4.86 per cent higher than the N7.64 trillion recorded in the corresponding quarter of 2024.
A significant portion of government expenditure went into recurrent obligations and debt servicing.
Non-debt recurrent expenditure stood at N2.66 trillion, representing a 21.75 per cent decline from the quarterly estimate of N3.40 trillion, but it was 31.20 per cent higher than the N1.83 trillion recorded in the third quarter of 2024.
Debt service consumed another N3.41 trillion during the quarter.
Although this was N171.90 billion below the quarterly projection of N3.58 trillion, domestic debt servicing alone exceeded its quarterly projection by N111.07 billion.
The government spent N1.80 trillion servicing domestic debt, while external debt service amounted to N1.69 trillion.
The combination of weak revenue, high recurrent obligations and substantial debt-servicing requirements has continued to constrain the fiscal space available for development expenditure.
The pressure was also reflected in the government’s financing requirements.
The report said the Federal Government’s fiscal deficit in the third quarter stood at N2.18 trillion, compared with a projected quarterly deficit of N1.86 trillion.
The deficit was financed through domestic borrowing, privatisation proceeds and multilateral/bilateral project-tied loans.
For the first three quarters of 2025, the total deficit reached N9.53 trillion, financed through N7.07 trillion in domestic borrowing, N4.81 trillion in multilateral and bilateral project-tied loans and N185.53 billion in privatisation proceeds.
This means that while revenue mobilisation remains weak, government continues to rely significantly on borrowing and other financing mechanisms to sustain its fiscal obligations.
The report’s findings also raise concerns about the relationship between government financing and credit available to businesses.
The document indicates that credit to the private sector declined by N3.64 trillion, or 4.78 per cent, from N76.14 trillion in June to N72.50 trillion in September 2025, while net credit to government increased by N430 billion.
This development could intensify concerns about the ability of businesses to access financing at a time when the government is seeking to stimulate investment, manufacturing, employment and private-sector-led growth.
Despite the fiscal pressures, the broader economy recorded some positive indicators during the quarter.
Real Gross Domestic Product (GDP) grew by 3.98 per cent year-on-year in the third quarter of 2025, compared with 3.86 per cent in the same quarter of 2024.
The growth was driven largely by the services sector, which expanded by 4.15 per cent, while the oil and non-oil sectors grew by 5.84 per cent and 3.91 per cent respectively.
Headline inflation also eased to 18.02 per cent in September from 20.12 per cent in August, according to the report.
However, the Budget Office cautioned that structural food supply constraints, exchange-rate pressures and elevated logistics costs remained important inflationary pressures.
Thus, the improvement in GDP growth and headline inflation has not eliminated the underlying fiscal challenges confronting the government.
Rather, the third-quarter budget figures suggest that Nigeria’s economic recovery is taking place alongside a persistent public-finance problem.
The Budget Office said oil revenue volatility continued to expose fiscal outcomes to production and price shocks, while fiscal space remained constrained by the high debt-service-to-revenue burden.
It recommended more realistic oil production assumptions, conservative price benchmarks, stronger tax compliance, further automation of customs processes and improved remittance of independent revenue.
It also called for value-for-money audits and prioritisation of projects with measurable economic returns.
For debt management, the report recommended reducing the debt-service-to-revenue ratio through stronger revenue mobilisation and greater use of concessional financing.
Ultimately, the Q3 figures present a paradox at the heart of Nigeria’s current economic story: the economy is growing, inflation is easing and non-oil revenue collection is improving, but the government’s capacity to finance its development agenda remains constrained by a deep oil-revenue shortfall, heavy debt obligations and weak capital releases.
Unless oil production improves and non-oil revenue gains are sustained, the report suggests that the government could continue to face difficult choices between meeting recurrent obligations, servicing debt and funding the infrastructure and development projects on which its economic transformation agenda depends.