The federal government has dismissed concerns that Nigeria’s public finances are deteriorating, insisting that the country is not facing a fiscal collapse but is undergoing a difficult yet necessary fiscal correction following years of structural distortions in the management of public revenue and expenditure.
The clarification was contained in a media brief issued by the Federal Ministry of Finance in Abuja and signed by the Special Adviser to the Minister of Finance and Coordinating Minister of the Economy on Media and Communications, Dr Ogho Okiti.
The document, titled “Deepening Public Understanding of Nigeria’s Fiscal Position: Context and Background,” explained that recent concerns over low capital releases to ministries, departments and agencies (MDAs) stem largely from misunderstanding the structure of Nigeria’s fiscal system, particularly the difference between Federation finances and the finances of the federal government.
According to the ministry, although Federation revenues may appear relatively stable in aggregate, the Federal Government’s share can fall significantly below projections when oil revenue underperforms.
The clarification followed recent appearances by the minister of Finance and Coordinating Minister of the Economy, Wale Edun, before the Senate and the House of Representatives in defence of the 2026 budget proposals, where lawmakers sought explanations on fiscal performance and capital expenditure execution.
The ministry cited sharp shortfalls in oil and gas revenue as a key factor affecting the Federal Government’s fiscal position in recent years.
In 2025, projected Federation oil and gas revenue stood at N37.4 trillion. However, actual inflows were only about N7 trillion, representing a performance rate of just 19 per cent.
The ministry noted that if the projections had been realised, the Federal Government alone would have received roughly N15 trillion more in revenue.
Because oil revenue allocation favours the Federal Government more than other revenue streams, such shortfalls tend to disproportionately impact federal finances.
Under the revenue-sharing framework, the Federal Government receives roughly 53 to 65 per cent of oil and gas revenues, depending on the specific components, while Value Added Tax (VAT) is distributed differently, with only 20 per cent going to the Federal Government and 80 per cent shared by states and local governments.
As a result, the ministry said oil underperformance can significantly weaken federal revenue even when total Federation receipts appear relatively stable.
Addressing concerns that low capital releases to MDAs suggest stalled infrastructure development, the ministry said capital expenditure execution remains ongoing but is being financed through a mix of funding sources.
It explained that federal capital spending consists of two major components: MDA-funded projects financed directly from federal cash revenues and projects funded through multilateral or project-tied loans.
The first category depends heavily on government revenue performance and may experience slower releases when fiscal pressures arise.
The second category, however, involves funds disbursed directly by development partners for specific infrastructure or social development programmes and does not necessarily appear as cash flows in federal government accounts.
According to the ministry, focusing solely on MDA cash releases gives an incomplete picture of capital spending.
Data cited in the brief shows that in 2024, total capital expenditure reached N11.59 trillion, representing about 84 per cent performance.
For 2025, provisional data as of November indicates capital spending of about N11.7 trillion, with performance at roughly 76 per cent.
“These figures demonstrate that capital projects are ongoing and execution continues. The financing mix differs, but implementation has not been abandoned,” the ministry stated.
The government also addressed concerns over rising debt service costs, stressing that recent increases do not reflect fiscal recklessness.
In 2024, debt service payments rose to N12.63 trillion, up from the N8.56 trillion originally budgeted, resulting in an overshoot of about N4 trillion.
Similarly, in 2025, debt service rose to N14.57 trillion, exceeding the budget projection of N13.12 trillion.
The ministry attributed the increase largely to macroeconomic factors, including currency depreciation and higher domestic interest rates.
Because a portion of Nigeria’s external debt is denominated in foreign currencies, depreciation of the naira automatically raises the local currency cost of servicing those obligations.
In the same way, tighter monetary policy and higher interest rates aimed at stabilising inflation and supporting the currency have increased the cost of servicing domestic debt.
The government said that, despite these pressures, it has prioritised debt servicing, salary and pension payments, and continued capital investment while avoiding monetary financing.
“This reflects fiscal discipline under strain rather than fiscal collapse,” the ministry said.
The ministry also noted that the increase in Nigeria’s public debt in nominal naira terms should be interpreted cautiously.
According to the brief, a significant portion of the increase reflects the formal recognition of about ₦30 trillion in Ways and Means advances previously obtained from the Central Bank of Nigeria (CBN).
These advances had accumulated over time but were not transparently reflected in the fiscal deficit framework before being securitised and incorporated into the public debt profile.
Additionally, exchange rate adjustments have sharply increased the naira value of external debt.
The ministry estimated that roughly ₦70 trillion of the nominal increase in public debt is attributable to exchange-rate valuation effects rather than to new borrowing.
Officials emphasised that the current administration inherited a fiscal system weakened by structural distortions and hidden deficits.
