Each year, Nigeria’s federal government sets ambitious revenue targets. And year after year, those ambitions fall short.
Despite a decade of warnings from economists and international financial institutions, Africa’s fourth-largest economy faces the same dilemma: unrealistic projections, structural weaknesses, and widening fiscal deficits.
The pattern is clear. Between 2015 and 2022, the federal government repeatedly missed its revenue targets. That trend reversed in 2023, with actual collections slightly surpassing projections. Full-year data for 2024 is still pending.
Take 2015, for instance: the federal government projected ₦3.6 trillion in revenues but collected just ₦2.8 trillion—a shortfall of ₦800 billion, or 22 percent, according to data from the Budget Office of the Federation.
By 2017, the target rose to ₦5.1 trillion, yet actual revenues came in at ₦2.7 trillion—a 47 percent miss.
The onset of the COVID-19 pandemic in 2020 deepened these vulnerabilities. Nigeria set a revenue target of ₦5.37 trillion but collected only ₦3.42 trillion—36.31 percent below target, according to the National Bureau of Statistics.
For the first time in years, however, the federal government slightly exceeded its revenue target in 2023, projecting ₦10.49 trillion and achieving ₦11.88 trillion by November—an outperformance of about 13.25 percent, driven by improved oil receipts and stronger non-oil collections.
Still, over the last decade, cumulative shortfalls have averaged close to 30 percent, based on a BusinessDay analysis. For every ₦100 the government hopes to earn, ₦30 fails to materialise.
To understand how big this problem is, the total amount of money the government failed to collect between 2015 and 2022 adds up to ₦18.6 trillion.
That’s even more than the entire amount the government budgeted revenue for 2024, which was ₦18.32 trillion. This shows just how serious and costly these repeated shortfalls have been for Nigeria’s economy.
A Persistent Structural Problem
Nigeria’s fiscal challenges are no longer cyclical; they are structural. The World Bank, in its 2024 Nigeria Development Update, highlights that the fiscal deficit has remained above 5 percent of GDP, far beyond the 3 percent ceiling prescribed by the Fiscal Responsibility Act.
The International Monetary Fund’s 2023 Article IV report put Nigeria’s debt-to-GDP ratio at 37 percent in 2022, up from 23 percent just three years earlier. CEIC Data shows government debt rose to 53.8 percent of GDP by September 2024.
There have been small signs of improvement. The World Bank reports Nigeria’s fiscal deficit narrowed from 6.2 percent of GDP in H1 2023 to 4.4 percent in H1 2024, largely due to better non-oil revenue collection and reforms aimed at plugging leakages.
Yet, these gains remain fragile. Nigeria’s chronic reliance on oil revenues exposes it to commodity price swings. Oil, at its peak, accounted for over 90 percent of foreign exchange earnings and still makes up more than half of public revenue. Any disruption—from pipeline vandalism to theft—immediately impacts earnings.
At the same time, non-oil revenues are underperforming. Nigeria’s tax-to-GDP ratio stands at 10.9 percent, one of the lowest among its African peers, according to the OECD’s 2023 African Revenue Statistics. By comparison, South Africa’s ratio exceeds 25 percent.
Tajudeen Ibrahim, director of research and strategy at Chapel Hill Denham, argues that expanding the tax base is key to solving the problem.
“We need to further expand our tax net to include those that are not currently paying taxes but are making taxable profits,” he says.
Many businesses remain informal and unregistered, while enforcement remains patchy. Corruption and revenue leakages worsen the problem. Billions of naira are lost annually due to inefficiencies and fraud within key agencies such as the Nigeria Customs Service and the Federal Inland Revenue Service.
The Nigerian Economic Summit Group (NESG) has warned that without tighter controls and enhanced transparency, revenue projections will continue to miss their mark.
The 2025 Budget: A Tipping Point?
President Bola Tinubu’s administration calls its 2025 plan the “Budget of Restoration.” It proposes ₦54.99 trillion in spending—the largest in Nigeria’s history.
To fund this, the government projects ₦36.35 trillion in revenue, a 123 percent increase from the previous year’s target.
Analysts remain sceptical. BusinessDay reports the government expects non-oil revenue to double on the back of enhanced tax collection and a more aggressive foreign investment drive.
However, with over 60 percent of income already tied up in debt servicing—projected to hit ₦16.3 trillion in 2025, up from₦8.25 trillion in 2024—there is little room for error.
“The government is essentially betting on revenue reforms to close the deficit gap,” says Femi Olapade, an economist specialising in public finance.
“But unless the assumptions behind these targets are credible, Nigeria risks repeating its mistakes.”
What Needs to Change
Experts point to several priorities.
Fixing the oil sector remains critical. Despite reforms such as restructuring the Nigerian National Petroleum Company (NNPC) under the Petroleum Industry Act of 2021 and the launch of the 650,000 barrels-per-day Dangote Refinery in late 2024 challenges persist.
Oil theft and pipeline sabotage continue to undermine production and revenues. Strengthening security in the Niger Delta and fully realising the benefits of these reforms are essential to stabilise the sector.
Tax reform must also move beyond rhetoric. While the rollout of the FIRS’ TaxPro Max platform has improved compliance, the government must broaden the tax base.
As Ibrahim emphasises, bringing informal businesses into the tax net and targeting those making taxable profits can significantly raise revenues.
Public financial management needs an overhaul. Greater transparency in procurement and rigorous audits of revenue-generating agencies are needed to stem corruption and waste.
Finally, Nigeria must diversify its economy beyond oil. Agriculture, manufacturing, and services hold potential but have yet to deliver meaningful contributions, despite years of policy promises.
The Stakes Are High
Tinubu’s 2025 budget hinges on delivering immediate and sustained revenue reforms. With debt servicing consuming more than half of government revenues, the margin for error is vanishingly thin.
If revenue projections are missed yet again, the government will be forced to borrow more, risking a debt burden that may prove unsustainable.
This could trigger painful fiscal adjustments and squeeze public investment in critical sectors like infrastructure, health, and education.
The World Bank has already warned that Nigeria faces a potential “fiscal crisis” unless it stabilises its finances.
Tinubu’s challenge is clear: break the cycle of unrealistic revenue projections and underperformance, or risk undermining Nigeria’s already fragile fiscal credibility. (BusinessDay)
