Nigeria’s debt service burden remained elevated, with new data showing that the Federal Government spent a significant portion of its earnings on servicing debt in the first nine months of 2025.

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According to the 2025 Third Quarter Budget Implementation Report, total debt service stood at N12.52 trillion between January and September 2025, accounting for over 67% of total revenue over the period.

This means that for every N100 earned by the government, over N67 was used to repay existing debt obligations—highlighting mounting pressure on public finances.

What the data is saying 

Debt servicing remained one of the Federal Government’s largest expenditure obligations in the first three quarters of 2025, significantly limiting fiscal flexibility.

  • Total debt service stood at N12.52 trillion between January and September 2025, representing 67.22% of total retained revenue during the period, reflecting the structural imbalance between government earnings and its growing debt obligations.
  • Debt servicing in Q3 2025 alone amounted to N3.41 trillion, consuming about 44% of the revenue.
  • Domestic debt service for the nine months period stood at N6.32 trillion, while the external debt service accounted for N4.93 trillion.
  • On a quarterly basis, domestic debt service accounted for N1.80 trillion in Q3, while external debt service amounted to N1.69 trillion.
  • When measured against net distributable revenue (FAAC) of N10.29 trillion in Q3, debt service accounted for over 33%.
  • This indicates a relatively balanced split between domestic and foreign debt repayments, even though domestic borrowing continues to dominate Nigeria’s overall debt stock profile.

More Insights 

Revenue performance during the period remained uneven, with oil earnings falling significantly below budget expectations despite resilience in non-oil collections.

  • The total Federal Government revenue reached N18.63 trillion between January and September 2025, significantly below the prorated budget target of N30.67 trillion, translating to a N12.04 trillion revenue gap.
  • Based on the quarterly data, total Federal Government revenue stood at N7.70 trillion, falling 24.6% short of the projected N10.22 trillion.

A key driver of the fiscal strain is the continued underperformance of oil and customs revenue.

  • In Q3, oil revenue contributed just N2.45 trillion (31.9%) of the total revenue, missing its target by 53.26%.
  • Custom revenue also dragged the FGN revenue performance with a shortfall of N262.59 billion (37.76%).
  • Average crude oil production stood at 1.64 million barrels per day, below the budget benchmark of 2.12 million barrels per day.
  • Average crude oil prices during the quarter stood at $68.50 per barrel, below the budget benchmark of $75 per barrel.

Other major contributors include Education Tax (TETFUND), Grants & Donor Funding, Share of CIT and FGN Independent Revenue, which contributed N556.92 billion (225.02%), N280.46 billion (147.24%), N248.70 billion (23.34%) and N203 billion (15.43%) respectively

The Budget Office attributed the weak oil performance to crude theft, pipeline vandalism, production disruptions, and lower international crude prices.

Despite the weakness in oil earnings, non-oil revenue sources provided some support for government fiscal performance during the period under review.

  • Non-oil revenue rose to N5.25 trillion (68% of total revenue) during the quarter.
  • Gross non-oil revenue rose to N6.52 trillion, exceeding the quarterly budget estimate by N468.58 billion, representing a 7.74% positive variance.
  • Company Income Tax collections reached N3.06 trillion, outperforming projections by 31.19%.
  • Value Added Tax collections stood at N2.28 trillion, above target by 21.74%.
  • Electronic Money Transfer Levy collections came in at N126.69 billion, more than double the projected amount for the quarter.
  • Independent revenue remittances also supported non-oil inflows during the period.
  • Improved collection efficiency helped offset some of the shortfall from oil revenue underperformance.

These gains reflect ongoing fiscal reforms aimed at broadening Nigeria’s revenue base and reducing dependence on crude oil earnings.

What this means 

Revenue weakness and elevated debt service obligations continued to constrain government spending capacity during the quarter. The scale of debt servicing continues to limit the government’s ability to fund key sectors.

  • In the third quarter of 2025, total spending stood at N8.03 trillion, significantly below the prorated budget of N13.75 trillion, representing a 41.57% underspending.
  • The key spending comprised N2.66 trillion on non-debt recurrent expenditure and debt service of N3.41 trillion, resulting in a fiscal deficit of N328.57 billion.
  • While the deficit remains relatively contained, analysts note that the rising share of revenue allocated to debt servicing continues to limit fiscal flexibility, particularly for capital and development spending.

What you should know 

Despite stronger non-oil revenue performance, analysts continue to express concerns over the growing share of government income allocated to debt servicing, which limits resources available for infrastructure, healthcare, education, and capital projects.

  • Nigeria’s total public debt stock rose to N153.29 trillion as of September 2025, with domestic debts contributing 53.37% and external debt accounting for 46.63%.
  • Higher domestic interest rates and elevated Treasury bill yields also contributed to rising debt servicing costs during the period.
  • The Budget Office maintained that Nigeria’s core fiscal challenge remains revenue generation rather than debt sustainability alone.
  • With global oil markets still volatile and domestic production below target, debt servicing is expected to remain a major fiscal pressure point unless revenue generation improves significantly over the medium term.