The Federal Government of Nigeria Overshoots 2025 Borrowing Target by 55.6% as Fiscal Pressures Intensify

The Federal Government has exceeded its borrowing target for the first 10 months of 2025 by 55.6%, accumulating ₦17.36 trillion in new debt, far above the ₦10.9 trillion prorated limit set in the 2025 Appropriation Act. The development heightens concerns over fiscal discipline, debt sustainability, and the crowding-out effects on private sector credit.

Data from the Debt Management Office (DMO) and the Central Bank of Nigeria (CBN) indicate that between January and October 2025, the government raised ₦15.8 trillion domestically and ₦1.56 trillion externally. This marks a sharp deviation from the full-year borrowing provision of ₦13.08 trillion, and significantly exceeds the prorated 10-month ceiling of ₦10.9 trillion.

The Federal Government has also initiated plans to raise an additional $2.35 billion (₦3.384 trillion) through a Eurobond issuance. If completed, total borrowing for the period will rise to ₦20.74 trillion, and projections based on monthly domestic auctions place full-year borrowing near ₦23 trillion, almost ₦10 trillion above the statutory allocation.

Domestic Debt Instruments Drive the Surge

Government reliance on domestic credit markets accelerated sharply:

• Treasury Bills: ₦11.43 trillion in 10M’25, up 4.6% year-on-year.

• FGN Bonds: ₦4.042 trillion, down 22% year-on-year.

• Savings Bonds: ₦40.19 billion, up 5.6% year-on-year.

• Sukuk Bonds: ₦300 billion, compared with zero issuance in 2024.

Analysts attribute the increase in treasury issuances and short-term paper to tighter liquidity needs, rising debt-service obligations, and delays in external financing due to higher global interest rates.

Analysts Cite Fiscal Indiscipline and Unrealistic Revenue Projections

Economists warn that the overshoot signals a deepening structural imbalance between revenue capacity and expenditure growth.

Andrew Uviase, Managing Partner at Ecovis OUC, said the widening gap reflects “fiscal indiscipline and poor expenditure control”, noting that non-oil revenue continues to lag despite modest improvements in tax administration.

David Adonri, Vice Executive Chairman of Highcap Securities, said the 2025 budget is anchored on “aggressive and unrealistic assumptions”, particularly oil output of 2.06 million barrels per day at $75 per barrel, compared with actual production of 1.6–1.7 million barrels and prices near $65.

He described the government’s debt trajectory as “a narcotic” that undermines IMF-supported consolidation efforts.

Tunde Abidoye, Head of Research at FBNQuest Merchant Bank, added that unrealistic benchmarks in the budget set the stage for “revenue shortfalls and higher-than-planned borrowing.”

Growing Risks to Private Sector Credit and Investor Confidence

Experts warn that rising sovereign appetite for domestic credit continues to crowd out private borrowers, push interest rates higher, and weaken long-term growth prospects.

According to Adonri, “Excessive government demand for domestic debt escalates the cost of funds and discourages investment in productive sectors.”

Uviase noted that as banks favour high-yield, low-risk government instruments, manufacturers and SMEs face higher borrowing costs and restricted credit access, slowing industrial output and job creation.

Clifford Egbomeade, a public policy analyst, highlighted the liquidity impact of heavy short-term borrowing. Between January and August 2025, the CBN raised ₦26.4 trillion through Treasury Bills and OMO operations, a 57% increase year-on-year, further tightening conditions for private capital formation.

Conflict With Fiscal Consolidation Targets and IMF Warnings

The borrowing surge contradicts the Medium-Term Fiscal Framework (2025–2027), which targets a deficit below 3 percent of GDP. It heightens concerns over Nigeria’s debt-service-to-revenue ratio, estimated by the IMF at around 83% in 2024.

Egbomeade warned that, despite improvements in macroeconomic indicators, including a GDP growth of 4.23 percent in Q2 2025, inflation moderating to 18 percent, and external reserves rising to $43 billion, the fiscal position remains fragile due to elevated recurrent expenditure and weak revenue mobilization.

Proposed Reforms to Reverse the Trend

Experts recommend wide-ranging measures to curb fiscal pressures:

1. Strengthen Revenue Mobilisation

• Broaden VAT to the informal sectors.

• Expand digital tax collection platforms.

• Address oil theft and improve production efficiency.

2. Reduce the Cost of Governance

• Cut wasteful recurrent expenditure.

• Streamline ministries, departments, and agencies.

• Improve procurement transparency.

3. Rebalance Borrowing Strategy

• Shift from short-term domestic instruments to longer-tenor, concessional external loans.

• Reduce reliance on domestic markets to ease pressure on interest rates and private credit.

4. Enforce Realistic Budget Assumptions

• Align oil production and price benchmarks with credible market forecasts.

• Adopt conservative revenue targets to reduce mid-year financing gaps.

Outlook

Nigeria’s borrowing trajectory in 2025 highlights widening structural fiscal challenges that require more decisive reforms. While elevated domestic yields provide short-term liquidity relief, they simultaneously weaken private-sector competitiveness and undermine long-term debt sustainability. Sustained revenue mobilization, expenditure discipline, and a more balanced financing mix remain essential to stabilizing the fiscal outlook and restoring investor confidence.