FG Recorded N2.66tn Fiscal Deficit Financed Through Domestic Borrowing as Debt Service Gulped N4.44tn in Q2

•Bagudu: despite fiscal pressures, government prioritised capital investment 

•Yakubu reaffirms commitment to transparent public reporting, adherence to budget implementation guidelines, others

James Emejo in Abuja

The federal government posted a fiscal deficit of N2.66 trillion, financed through domestic borrowing in the second quarter of the year (Q2 2025), according to Budget Office of the Federation (BoF).

Under the review period, total federal government revenue stood at N5.97 trillion, while expenditure peaked at N8.63 trillion, resulting in a deficit.

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.

These were contained in the Second Quarter and Half-Year 2025 Budget Implementation Report (BIR) by the BoF.

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, the report said.

According to Director-General, BoF, Dr. Tanimu Yakubu, 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.

According to Yakubu, 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.

Yakubu said the 2025 budget was prepared taking into consideration the policies/strategies contained in the 2025-2027 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), which provided the economic framework for the appropriation, along with fiscal policy objectives and spending priorities of the government over the three-year period.

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.

Yakubu said allocations to MDAs were guided by the strategic objectives of the National Development Plan 2021 to 2025, which were diversifying the economy, with robust MSME growth; investing in critical infrastructure; strengthening security and ensuring good governance; enabling a vibrant, educated and healthy populace; reducing poverty; and minimising regional, economic and social disparities.

Moving forward, Yakubu said the budget office will sustain its role in rigorous monitoring, inter-agency data integration, and transparent public reporting, ensuring fiscal policy remained aligned with the macroeconomic stability objectives of the National Development Plan (2021-2025) and the strategic commitments of the “Budget of Restoration: Securing Peace, Rebuilding Prosperity.”

However, during the review period, Gross Domestic Product (GDP) grew by 4.23 per cent (year-on-year) in real terms in the second quarter of 2025. The growth rate was higher than the 3.48 per cent recorded in the second quarter of 2024 by 0.75 percentage points.

Headline inflation rate eased to 22.22 percent in June 2025 relative to the March 2025 headline inflation rate of 24.23 percent. This translated to a decrease of 2.01 percentage points compared to the March 2025 Headline inflation rate.

According to the BoF, “The performance of the economy during the quarter was commendable considering developments in the global economy and the performance of many other economies.

“Nonetheless, government would continue to fast-track efforts towards improving the economic growth and revenue generation performance. Improving revenue collections in the subsequent quarters of the year is critical to the successful execution of the 2025 Budget.

“Efforts to curb the growth in recurrent expenditure and particularly personnel expenditure in 2025 and beyond is important even as effective implementation of measures to address the security challenges continue to be a priority.

“The federal government remains committed to the goals of improved openness, transparency and accountability in budget preparation, implementation, monitoring and evaluation and feedback.”

It said, “In view of this, government will continue to ensure firm adherence to budget implementation guidelines and the governance framework on monitoring of capital budget implementation.

“Efforts would also be geared towards promoting efficiency in budget implementation, while guaranteeing effective project management in the succeeding quarter of 2025 and beyond.”