Nigeria’s fiscal challenges intensified in January 2025, as the Central Bank of Nigeria reported, with debt servicing costs significantly outpacing total retained revenue.
For the month, the Federal Government spent N696.27bn on debt servicing, while its total retained revenue was only N483.47bn. This means that debt repayment alone consumed approximately 144% of the government’s earnings.
This situation underscores Nigeria’s increasing debt burden and shrinking fiscal capacity, Africa’s largest economy.
Although some revenue streams saw minor increases, the total retained earnings were insufficient to cover mandatory debt repayments. This forced the government to continue relying on borrowing to meet essential financial obligations.
Nigeria’s provisional retained revenue in January 2025 was N0.48 trillion, a marginal 0.89% increase from the N479.21 billion recorded in January 2024. However, this figure fell significantly short of the previous period’s performance and the monthly target.
This shortfall was primarily due to decreased independent revenue and exchange gain share, which outweighed the slight revenue increase. Furthermore, substantial debt service obligations effectively negated the slight rise in retained revenue, resulting in overall financial stagnation for the Federal Government of Nigeria during the month. The retained revenue components showed that the Federation Account contributed N167.69bn, while the VAT Pool Account delivered N90.73bn.
Independent Revenue, a key component expected to reflect the efficiency of Ministries, Departments, and Agencies, plummeted to N32.28bn, representing a staggering 66.14 per cent year-on-year decline from N95.34bn recorded in January 2024.
Exchange gains, however, provided a lifeline as revenues from this segment grew by 35.6 per cent, rising from N138.67bn in January 2024 to N188.09bn in January 2025.
Month-on-month comparisons showed an even bleaker picture. In December 2024, retained revenue stood at N1.57tn, suggesting that January’s N483.47bn marked a massive 69.19 per cent decline in government earnings within a month.
During December 2024, debt servicing accounted for only 44.37 per cent of total revenue.
By January 2025, this figure had ballooned to 144 per cent, highlighting the government’s worsening vulnerability to revenue shortfalls and signalling a dangerous path toward a debt trap.
In contrast, debt servicing obligations remained relatively stable over the months. Debt service expenditure of N696.27bn in January 2025 was only 7.88 percent lower than the N755.86bn recorded in January 2024.
Despite a lack of significant revenue growth, Nigeria’s debt-to-revenue ratio has worsened considerably, indicating a growing reliance on new borrowing to meet financial obligations. This situation is exacerbated by falling global oil prices, which the IMF had previously warned would increase budgetary pressure on Nigeria and other oil-producing nations. IMF Managing Director Kristalina Georgieva highlighted this challenge during a recent press briefing in Washington, D.C.
Oil producers like Nigeria are under budget pressure due to lower oil prices,” Georgieva said. “On the other hand, oil importers may benefit. But broadly, slowing global growth will affect everyone, and we have already downgraded the continent’s growth prospects.”
Georgieva advised Nigeria and other African nations to increase domestic revenue mobilisation immediately.
She advised governments to employ technology to increase their revenue base, decrease tax evasion, and fortify fiscal buffers rather than continue making excuses.
Source: Punch News
Image Credit: Daily Post
