Nigeria’s fiscal deficit climbed to about ₦5.7 trillion in the first six months of 2025, underscoring persistent pressure on public finances amid weak revenue mobilisation and elevated government spending.
Data from the Q1 and Q2 2025 Budget Implementation Reports released by the Budget Office of the Federation show that although the deficits came in below projections, they remained significantly higher than levels recorded in the same period of 2024.
The figures point to a widening gap between government revenue and expenditure, forcing the Federal Government to lean heavily on domestic borrowing and concessional external loans to fund its obligations.
Q1 Deficit Rises Despite Lower-Than-Expected Outturn
In the first quarter of 2025, Nigeria posted a fiscal deficit of ₦3.04 trillion, representing a 13.67 per cent shortfall below the projected ₦3.53 trillion for the period.
Despite beating projections, the Q1 deficit marked a sharp increase from the ₦1.47 trillion recorded in the corresponding quarter of 2024, reflecting rising expenditure pressures.
The government financed the Q1 gap largely through ₦3.30 trillion in domestic borrowing, supported by ₦57.16 billion from privatisation proceeds and ₦70.11 billion from multilateral and bilateral project-tied loans.
Q2 Deficit Improves Year-on-Year
In the second quarter, the fiscal deficit moderated to ₦2.66 trillion, coming in 24.52 per cent below the projected ₦3.53 trillion for the quarter.
This performance also represented an improvement over the ₦3.17 trillion deficit recorded in Q2 2024, suggesting some easing in fiscal pressures compared to the previous year.
According to the Budget Office, the Q2 deficit translated to a deficit-to-GDP ratio of 2.64 per cent, which remains within Nigeria’s 3 per cent fiscal threshold and aligns with ECOWAS convergence criteria.
Borrowing Remains Central to Deficit Financing
Financing of the Q2 deficit again relied heavily on borrowing, with ₦2.80 trillion sourced domestically.
However, external financing played a more prominent role during the quarter, as multilateral and bilateral project-tied loans surged to ₦1.60 trillion, alongside ₦7.76 billion from privatisation proceeds.
This shift reflects the government’s strategy to manage borrowing costs by increasing its use of concessional external funding while supporting capital projects and recurrent spending.
Why the ₦5.7 Trillion Deficit Matters
Combined, the Q1 and Q2 figures bring Nigeria’s total fiscal deficit for the first half of 2025 to about ₦5.7 trillion, highlighting a sustained imbalance between revenues and expenditures.
While the deficits remain below budgeted levels, analysts warn that heavy domestic borrowing could intensify debt sustainability risks, raise interest costs, and potentially crowd out private sector credit if revenue performance fails to improve in the second half of the year.
Earlier reports showed that Nigeria’s fiscal deficit surged to ₦13.51 trillion in 2024, breaching targets and exceeding the Fiscal Responsibility Act (FRA) 2007 deficit-to-GDP limit, further amplifying concerns about long-term fiscal stability.
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