Fresh data released by the Budget Office of the Federation has revealed that the Federal Government’s debt repayments exceeded the allocation provided in the amended 2025 budget by N1.90tn within the first nine months of the year.

According to the 2025 third-quarter Budget Implementation Report, total debt-related payments, comprising domestic debt, foreign debt and sinking fund obligations, amounted to N12.63tn between January and September. This exceeded the prorated budget provision of N10.74tn by N1.90tn, representing an overrun of 17.65 per cent.

The report showed that the increase was driven mainly by debt servicing costs, which stood at N12.52tn during the first three quarters of the year, compared with a prorated allocation of N10.45tn. This translated to excess spending of N2.07tn, representing 19.8 per cent above budget.

A breakdown of the figures indicated that domestic debt servicing accounted for N6.23tn, surpassing the budgeted provision of N5.39tn by N832.42bn.

Foreign debt servicing also exceeded projections, rising to N6.30tn against an allocation of N5.06tn, resulting in an overrun of N1.24tn.

The report further showed that debt servicing alone consumed 67.2 per cent of the Federal Government’s retained revenue of N18.63tn during the first nine months of 2025.

When sinking fund obligations were added, debt-related payments accounted for approximately 67.8 per cent of total retained revenue.

The figures imply that out of every N100 retained by the Federal Government between January and September, about N67 was spent servicing debt obligations, leaving only around N33 for salaries, overhead costs, capital projects, transfers and other government responsibilities.

The Budget Office report also revealed that aggregate Federal Government revenue underperformed budget expectations by N12.03tn or 39.24 per cent during the review period.

Actual revenue stood at N18.63tn, significantly below the projected N30.67tn expected for the first three quarters of the year.

In the third quarter alone, government revenue amounted to N7.70tn, falling short of the quarterly target of N10.22tn by N2.52tn, representing a deficit of 24.64 per cent.

The Budget Office attributed the weak revenue performance largely to continued shortfalls in oil revenue despite stronger collections from non-oil sources.

The growing debt burden also had a significant impact on capital expenditure, with total capital spending reaching only N3.10tn during the first nine months of the year.

This was substantially lower than the N17.58tn budgeted for the period, indicating that actual debt-related payments were more than four times the amount spent on capital projects.

The report noted that the debt service-to-revenue ratio remained high and warned that limited fiscal space continued to constrain government operations, making urgent revenue mobilisation and expenditure rationalisation necessary.

Overall Federal Government expenditure stood at N24.66tn during the first three quarters, below the prorated budget estimate of N41.24tn by N16.58tn.

Despite the lower overall spending, the composition of expenditure showed that debt obligations continued to receive priority over capital releases.

The fiscal deficit for the first nine months stood at N6.03tn, compared with a prorated deficit target of N10.58tn.

Financing items totalled N12.07tn, driven mainly by multilateral and bilateral project-tied loans amounting to N4.81tn and domestic borrowing of N7.08tn.

The figures highlighted that Nigeria’s principal fiscal challenge remains weak revenue generation rather than expenditure alone, as rising debt-servicing costs continue to absorb a substantial portion of government income and limit resources available for infrastructure investment.

As fiscal pressures persist, the Federal Government is exploring options to refinance some of its expensive debt obligations while also seeking additional funding sources to bridge the budget deficit.

The move is being supported by favourable market conditions and stronger investor sentiment, aided by higher global crude oil prices.

Speaking in an interview with Bloomberg TV on Wednesday, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, said, “We think that this timing is good for us to be able to maybe even refinance some of our expensive past debts, but also to raise more funding for our development at this critical time.

“You don’t know what happens tomorrow. But as of today, market conditions are actually very good.”

The improved economic outlook has been supported by the recent rise in crude oil prices following geopolitical tensions involving the United States, Israel and Iran.

As one of Africa’s major oil-producing nations, Nigeria has benefited from stronger export earnings, while investors have become increasingly confident in the country’s ability to meet its financial obligations.

According to Oyedele, the government is evaluating options to finance an estimated N30tn budget deficit this year despite improved tax revenues generated through ongoing fiscal and tax reforms.

“We’re keeping our options open; we know the size of the deficit,” Oyedele said, including less-costly concessionary loans.

He added that discussions were ongoing with the World Bank and other multilateral institutions, while investor interest in Nigeria had increased following reforms introduced by the government.

The minister’s remarks come at a time when higher oil prices are providing some relief for public finances, although they also pose inflationary risks.

The resulting inflationary pressures have complicated monetary policy decisions and contributed to the decision of the Central Bank of Nigeria to pause its interest-rate easing cycle.

Analysts believe the situation could further challenge the government’s capacity to finance critical infrastructure and social development projects as the administration of Bola Tinubu pursues economic reforms and increased development spending.

However, Oyedele recently maintained that Nigeria could no longer depend primarily on borrowing to finance development, stressing the need for a sustainable fiscal framework capable of supporting key sectors of the economy.

Earlier findings had shown that the Federal Government spent only N3.10tn on capital projects in the first nine months of 2025 despite obtaining N11.89tn from various debt-financing sources during the same period, highlighting the disparity between borrowing and infrastructure investment.

Economists who spoke on the issue urged the Federal Government to focus on boosting revenue, disposing of non-essential assets and encouraging greater private-sector participation in infrastructure financing as a means of reducing dependence on borrowing and controlling rising debt-servicing costs.

The Chief Executive Officer of CSA Advisory, Aliyu Ilias, warned that increasing debt levels would inevitably result in higher debt-servicing obligations.

“The more you borrow, the more you are also incurring more debt services,” he said.

Ilias suggested that the government could generate additional funds by selling selected public assets and taking advantage of increased oil revenues linked to geopolitical developments in the Middle East.

“The government can actually sell off some of their assets to raise more money. The government can also, if you look at the revenue we are getting from oil, it’s getting more, especially with this war. It’s another opportunity for us to actually not borrow again,” he said.

He also identified tax reforms as another potential avenue for improving public finances and reducing the fiscal deficit.

“Government can also look at tax reform. The fact is that the government does not have money. The only chance for getting more money is to address the financial deficit,” he added.

Also commenting on the issue, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, expressed concern over the high cost of borrowing in Nigeria.

“Well, the debt servicing cost, first, we need to worry about the rate at which we borrow. I’m talking about the interest rate. Because the rates we offer for our bonds and even treasury instruments are too high. So it’s a major issue,” he said.

According to Yusuf, policymakers must balance the objective of attracting foreign portfolio investments with the need to contain the increasing cost of servicing domestic debt.

“It’s helping us to attract portfolio investment, but it’s creating a huge burden of debt service. We have to balance those two objectives,” he stated.

He called for closer coordination between fiscal and monetary authorities to reduce interest rates and lower government borrowing costs.

Yusuf also advocated broader use of public-private partnerships, arguing that many infrastructure projects currently financed through budgetary allocations could be transferred to private-sector investors.

“Let’s identify projects that are feasible. We should be able to create a pool of projects that we take off from the budget and hand over to the private sector to put their money,” he said.

He further argued that the Federal Government should streamline its responsibilities and allow state governments to assume greater roles in certain areas of development.

“The Federal Government is involved in too many things. The Federal Government should concentrate on core strategic investments such as security, interstate highways, power and other critical infrastructure,” he said.