Nigeria’s infrastructure bet chokes as debt trap, weak revenue crush N10.8trn capital budget

The federal government is struggling to turn its ambitious budget plans into real infrastructure spending, recording a steep 73.7 percent shortfall in capital expenditure in the first seven months of the year as debt servicing and weak revenues continued to squeeze fiscal space.

Although total capital spending stood at N3.60 trillion as of July 2025, this figure still represented a 73.7 percent shortfall from the target for the first seven months of the year. The Budget Office, however, attributed the weak outturn largely to efforts to complete the 2024 capital budget, which was extended to December 2025, thereby constraining fresh releases under the 2025 plan.

The shortfall in capital releases occurred against the backdrop of broader expenditure underperformance. Aggregate spending for the 2025 fiscal year is projected at N54.99 trillion. By the end of July, the prorated spending benchmark was N32.08 trillion, but actual expenditure reached only N20.40 trillion, highlighting significant slippage.

A breakdown of the figures shows that recurrent obligations continued to crowd out development spending. Of the N20.40 trillion spent, N9.81 trillion went to debt servicing, while personnel costs, including pensions, accounted for N4.51 trillion. Debt servicing alone exceeded its prorated target by 17.5 percent, with domestic and external debt payments surpassing their respective benchmarks by 10.9 percent and 28.7 percent. The Budget Office said the pattern reflects rising debt pressures and the growing share of government resources devoted to interest payments.

Revenue performance offered little relief. The federal government realised N13.67 trillion in retained revenue during the period, representing 66.8 percent of the full-year target of N23.85 trillion. Oil revenue remained a major weak point, with the federal share standing at N4.64 trillion, just 37.8 percent of its prorated target, amid persistent production and market challenges in the oil sector.

Non-oil revenues were comparatively stronger, reaching N4.27 trillion, or 86.3 percent of the half-year target. Company Income Tax contributed N2.54 trillion, while value added tax collections of N630.10 billion exceeded their target by 11 percent. Customs revenue, however, lagged expectations, with N1.06 trillion collected against a prorated projection of N1.87 trillion.

Faced with weak capital execution, revenue constraints and rising debt costs, the Federal Government has opted to roll over much of its investment programme into next year. In the 2026 Abridged Budget Call Circular issued on December 4, 2025, ministries, departments and agencies were directed to carry over 70 percent of their 2025 capital allocations into the 2026 fiscal year, as the administration focuses on completing ongoing projects rather than starting new ones.

The circular imposed strict conditions on the preparation of next year’s spending plans, including a ban on introducing new capital projects. It stated that MDAs must “upload 70 per cent of their 2025 FGN Budget to continue in FY2026” and ensure that all rollover items align with the government’s priority areas, including national security, economic growth, education, health, agriculture, infrastructure, power, energy and social safety nets.

Under the new framework, capital budget ceilings for 2026 have been capped at 70 percent of 2025 project allocations. Only 30 percent of this year’s capital budget will be released in 2025, while the remaining 70 percent will form the basis of capital spending next year. According to the Ministry of Budget and Economic Planning, the policy is designed to prevent duplication, strengthen continuity and ensure that uncompleted projects are not abandoned.

The ministry also warned MDAs against attempting to exceed their 2025 overhead ceilings in their 2026 submissions, despite inflationary pressures, signalling tighter fiscal controls in the year ahead. (BusinessDay)