Salaries, Debt Outstrip Revenue as Nigeria Spends 105% of Earnings
Atume Terfa
Nigeria’s public finances are under growing strain after new figures revealed that the Federal Government spent more than it earned on salaries and debt servicing in the first seven months of 2025, leaving little room for development spending and intensifying concerns about fiscal sustainability.
Data contained in the 2026–2028 Medium-Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) show that recurrent obligations — driven largely by personnel costs and debt repayments — consumed over 105 per cent of total revenue between January and July. The development underscores a widening gap between government income and core financial commitments.
During the period, the government generated ₦13.67 trillion in revenue, falling sharply short of the ₦23.85 trillion pro-rata target set in the budget. In contrast, spending on salaries and debt servicing climbed to about ₦14.32 trillion, effectively exhausting all earnings and pushing the treasury into a precarious position.
A closer look at the numbers reveals the scale of the burden. Debt servicing alone accounted for roughly ₦9.81 trillion, nearly 72 per cent of total revenue, reflecting the rising cost of both domestic and foreign borrowings. Personnel expenses across ministries, departments, agencies and government-owned enterprises added another ₦4.51 trillion, further tightening fiscal space.
The heavy weight of recurrent spending has taken a toll on capital investment. With salaries and debt repayments taking priority, funding for infrastructure and other development projects was significantly curtailed. Total federal expenditure during the seven-month period stood at ₦20.40 trillion, well below the ₦32.08 trillion pro-rated budget, a shortfall of 36.4 per cent largely attributed to reduced capital spending.
Economists say the trend highlights Nigeria’s long-standing structural weaknesses, including weak revenue mobilisation, high debt costs and limited fiscal buffers. Analysts warn that when debt service and wages consume such a large share of income, governments are left with little capacity to invest in growth-enhancing sectors such as roads, power, health and education.
The outlook remains challenging. Projections for 2026 indicate total retained revenue of about ₦34.33 trillion, even as debt servicing continues to rank among the government’s largest expenditure items. This raises questions about how sustainably future budgets can be financed without deeper reforms.
As revenue consistently underperforms and recurrent costs continue to rise, pressure is mounting on policymakers to expand the tax base, improve collection efficiency, curb borrowing and redirect spending toward productive investments — steps many analysts say are critical to restoring confidence in Nigeria’s fiscal management and long-term economic stability.
