Nigeria’s Troubling First Quarter Budget Performance

Nigeria’s economic recovery is confronting a fundamental contradiction. While some key macroeconomic indicators appear to be moving in a favourable direction, the federal government’s finances are under considerable strain. 

The first quarter 2026 Budget Implementation Report obtained during the week presents a sobering picture of a traumatised economy in which revenue mobilisation remains weak, debt obligations are growing increasingly and capital investment lagging.

The figures point to structural weaknesses that threaten the sustainability of the country’s economic recovery and raise serious questions about the government’s capacity to translate macroeconomic gains into improved living conditions, which has been a major issue ahead of the 2027 elections.

The report showed that in the first quarter, the 2026 Budget which was titled, “Budget of Consolidation, Renewed Resilience and Shared Prosperity,” failed to strengthen macroeconomic resilience, promote sustainable economic growth and improve the welfare of citizens, judging from its performance.

According to the report, in the 2026 Fiscal Framework, gross federally collectible revenue was projected at N70.56 trillion, comprising N37.40 trillion (53 percent) Oil Revenue and N33.16 trillion (47 percent) other revenues. The amount translated to a prorated quarterly gross federally collectible revenue projection of N17.65 trillion for 2026. Nevertheless, actual gross oil revenue stood at N2.97 trillion in the review period, translating to N6.36 trillion (68.20 percent) shortfall, when compared with the 2026 quarterly prorate budget estimate of N9.33 trillion. The performance was N1.58 trillion below the N4.55 trillion generated in the fourth and first quarters of 2025 respectively.

Equally, a breakdown of the oil revenue performance in the first quarter of 2026 showed that only Miscellaneous (Pipeline fees etc.) exceeded the quarterly budget estimates, while all other oil revenue items performed below their quarterly budget projections. The actual net oil revenue that accrued into the federation account in the period under review was N2.53 trillion, depicting a decrease of N5.46 trillion from the prorated quarterly budget estimate of N8 trillion.

The poor net oil revenue performance was attributed to the lower than projected crude oil revenue outturn, fall in production and lifting, as well as poor industry investments in the past. In the same vein, a total of N4.91 trillion gross federally collected non-oil revenue was generated, indicating a decrease of N2.35 trillion percent from the quarterly estimate of N7.26 trillion.

Clearly, the poor revenue collection is the foundation of Nigeria’s fiscal problem. A government that is falling short of its revenue projections cannot sustainably meet its obligations and have the financial capability to address other needs. This means borrowing more to meet its obligation, which is a reflection of the country’s strong appetite for debt.

More troubling is the proportion of the federal government’s revenue that goes into servicing its debt. The government spent N4.63 trillion on debt service during the quarter, exceeding its prorated budget provision by N747.62 billion. This expenditure was equivalent to approximately 91.2 per cent of actual revenue generated within the period.

The implication is that nearly every naira collected in revenue by the country is being committed to servicing existing debt. With this, the federal government will struggle to make the investments required to expand its productive capacity when an overwhelming proportion of its income is deployed to meeting past borrowing obligations. Investment in roads, electricity, schools, hospitals, security and other development priorities compete for the limited resources would certainly suffer. This is not a sustainable fiscal arrangement.

The report also put the country’s total public debt stock as at 31st March, 2026, at N159.35 trillion (US$114.95 billion). The breakdown comprised N87.40 trillion (US$63.05 billion) or 54.85 percent for domestic debt stock while the balance of N71.95 trillion (US$51.90 billion) or 45.15 percent was for external debt stock.

Equally disturbing is the near-standstill in the implementation of the 2026 capital budget by ministries, departments and agencies. Against a prorated first-quarter capital expenditure target of N8.07 trillion, actual capital expenditure was N1.69 trillion, a shortfall of 79.06 per cent. The report specifically records zero implementation of the 2026 capital budget by MDAs as at March 31, attributing this to the extension of the utilisation period for 2025 capital releases.

Credit to the private sector fell from N94.21 trillion in December 2025 to N80.16 trillion in March 2026, a contraction of 14.91 per cent. At the same time, the average maximum lending rate rose to 35.17 per cent from 29.32 per cent.

Reacting to the report, Lagos-based financial advisory firm, CFG Advisory, noted that while releasing the report was, a positive development towards compliance with FRA 2007, it reiterated its calls for Fiscal Responsibility Act 2007 (FRA 2007) Compliance Audit especially in light of the Q1 2006 budget performance results and the sustainability of the proposed fresh borrowing request by the federal government and its impact on the FGN Capital Structure.

“The debt servicing numbers and deficits have reached critical levels, putting fiscal management under severe pressure and threatening reform gains,” it noted, pointing out that the Budget Implementation Reports for fourth quarter 2025, ⁠second quarter 2026 and third quarter 2026, were still outstanding and in non-compliance of FRA 2007.

Indeed, the first-quarter report exposes three interconnected policy challenges in the country. Nigeria must improve revenue mobilisation, reduce its excessive dependence on crude oil receipts and strengthen the discipline with which public expenditure is planned and implemented.

Tax reforms must translate into better compliance, a broader revenue base and improved collection efficiency, rather than merely higher fiscal expectations. Oil production must rise and the country must take decisive steps to ensure that leakages are blocked and non-oil exports must become a more substantial source of national income.

Nigeria cannot borrow its way to prosperity. That is why the recent move by the government to use part of its proposed debt to further shore up the external reserves sounds awkward. This is because external reserves accumulated through borrowing are not the same as those generated through exports, investment inflows or other sustainable sources of foreign exchange. Borrowing increases the country’s external liabilities even as it increases its reserve assets. It also exposes the country to greater foreign exchange risk. Since the facilities are denominated in foreign currencies, they will increase Nigeria’s exposure to exchange-rate movements. Any significant depreciation of the naira could raise the domestic-currency cost of servicing and repaying the loans, putting further pressure on government finances.

Borrowing also increases the country’s refinancing and repayment risks, particularly given its existing debt redemption profile. Nigeria faces substantial commercial debt repayments in 2027 and 2028, including obligations that require the principal to be repaid in lump sums. Unfortunately, the country does not appear to have a sinking fund to cushion the pressure of these bullet repayments. A sinking fund allows the government to set aside money periodically towards the repayment of debt as it falls due, rather than having to mobilise the entire amount at once. Therefore, Nigeria’s borrowing should be guided by demonstrable economic returns, AND not simply BY the need to bridge recurring revenue gaps.

Also, we need to see increased synergy between the fiscal and monetary policymakers. Finally, economic growth, positive economic indicators and economic stability that the government has continued must generate jobs, improve household welfare and bring about improved government revenue.