Fiscal juggle
Nigeria's Q1 2025 revenue hit $4.48 billion, up 40% year-on-year in naira terms, but below target. Debt burden remains high; budget extended amid criticism.
Nigeria’s Finance Minister Wale Edun reported Q1 2025 government revenue of ₦6.9 trillion, a 40% increase year-on-year but 31% below target. Improved transparency reduced the debt service-to-revenue ratio from 150% to 60%, yet national debt is projected to hit ₦183 trillion. The Senate set a ₦10 trillion revenue target for Customs and extended the 2024 capital budget deadline to December 31, 2025, to complete projects amid resource shortfalls. The extension sparked criticism over poor financial management and transparency, but was approved to avoid abandoning federal projects, resulting in Nigeria operating two budgets simultaneously this year.
Nigeria's first-quarter (Q1) 2025 fiscal report presents a nuanced picture of progress intertwined with persistent structural challenges. While the government recorded a notable year-on-year increase in revenue, fundamental weaknesses in revenue mobilisation, debt sustainability, and budget implementation remain pressing concerns.
Finance Minister Wale Edun reported a significant 40% year-on-year rise in government revenue, reaching ₦6.9 trillion in Q1 2025. This signals a positive stride toward economic recovery, likely propelled by ongoing tax administration reforms and an improved performance in the oil sector. With this trend, Nigeria could be on track to generate approximately ₦28 trillion in revenue for 2024. However, when converted to US dollars, this figure is just $18 billion, a remarkably modest sum for Africa's most populous country. Similarly, Nigeria's substantial ₦55 trillion ($35 billion) annual budget for 2025 roughly equates to that of Kenya, a country with only a quarter of Nigeria's population and a third of its GDP. Despite its vast natural resource wealth, this stark comparison underscores Nigeria's considerable unproductivity.
The fact that the Q1 revenue still fell short of its target by a third highlights Nigeria’s chronic issues with revenue generation. Despite concerted efforts to expand the tax base and enhance collections, weak compliance, fluctuations in oil production, and inefficiencies within revenue agencies continue to impede optimal performance.
A positive development is the reduced debt service-to-revenue ratio from 150% to 60%, reflecting greater revenue transparency and potentially tighter expenditure controls. Yet, sustainability concerns persist with the national debt projected to approach ₦190 trillion. While lower debt servicing costs offer some immediate fiscal relief, Nigeria’s debt trajectory remains perilous, particularly if revenue growth falters or global borrowing conditions become more stringent.
The Senate's contentious decision to extend the 2024 capital budget deadline to December 2025 has rightly ignited criticism, exposing significant flaws in financial management. This move effectively forces Nigeria to operate two budgets concurrently this year. While the government defends the extension as crucial for completing vital projects amidst funding shortfalls, it raises several serious concerns.
Firstly, it points to weak budget discipline. Frequent extensions often signal poor project execution and inadequate cash flow management. Secondly, there are considerable transparency risks; managing dual budgets complicates fiscal oversight and could inadvertently facilitate wasteful spending. Lastly, it highlights structural inefficiencies, as the persistent underfunding of capital projects underscores systemic issues in how revenue is allocated and utilised across the country.
Furthermore, the ambitious ₦10 trillion revenue target set for the Nigeria Customs Service (NCS) faces significant hurdles, including rampant smuggling, corruption, trade bottlenecks, and concerns about the service’s institutional capacity. Achieving this target will necessitate rigorous enforcement and modernisation efforts, which have historically encountered implementation delays.
While Nigeria's fiscal improvements in Q1 2025, especially in revenue growth and debt service management, are commendable, they exist alongside deeper structural weaknesses. These include a persistent gap between set targets and actual performance, an escalating debt stock, and a reliance on ad-hoc budgetary measures. To ensure long-term stability, the Nigerian government must enhance revenue mobilisation through stricter tax compliance and a decisive reduction in oil theft. They must also improve budget credibility by aligning appropriations with realistic revenue projections, strengthen debt management to prevent unsustainable accumulation, and boost expenditure transparency to rebuild public and investor confidence.
Without these critical reforms, Nigeria’s fiscal trajectory will remain susceptible to shocks, jeopardising its economic recovery and broader development objectives.