Nigeria’s fiscal crisis deepened in January 2025 as the Federal Government spent a staggering N696.27bn on debt servicing, an amount that surpassed its total retained revenue of N483.47bn by 44%. This alarming imbalance, highlighted in the Central Bank of Nigeria’s Monthly Economic Report, shows debt servicing consuming 144% of government earnings, signaling a sharp contraction in fiscal space and raising serious concerns about the country’s financial sustainability.
Despite marginal gains in revenue, up just 0.89% year-on-year—the increase was too modest to cushion the impact of mounting debt obligations. The drop in independent revenue and exchange gains, combined with underwhelming returns from VAT and the Federation Account, exposed persistent weaknesses in the country’s revenue-generating structure. Notably, independent revenue from government MDAs plummeted by 66.14%, from N95.34bn in January 2024 to N32.28bn in 2025.
Month-on-month data revealed a steep revenue decline from N1.57tn in December 2024 to just N483.47bn in January 2025, marking a 69.19% plunge. Yet, debt servicing barely moved, falling only 7.88% year-on-year. This growing disparity pushed Nigeria’s debt-to-revenue ratio into crisis territory, forcing the government into an increasingly unsustainable fiscal pattern of borrowing to fund recurring obligations.
The International Monetary Fund has raised the alarm, with Managing Director Kristalina Georgieva citing falling oil prices and weak domestic revenue mobilisation as major risks to Nigeria’s economic outlook. She urged the government to adopt technology-driven tax reforms and stop delaying critical fiscal actions. As Nigeria teeters on the edge of a debt trap, the need for structural reforms and diversified revenue streams has never been more urgent.
Source: Punch