Nigeria's fiscal deficit saw a significant contraction, narrowing to N330 billion in the third quarter of 2025. This improvement reflects enhanced government revenue performance and more stringent expenditure controls compared to the previous year.
The report from the Budget Office of the Federation indicated that the Federal Government's fiscal operations resulted in a deficit considerably lower than initially anticipated for the quarter.
Specifically, the N330 billion deficit in Q3 2025 marked a substantial reduction of N3.20 trillion, or 90.68%, from the projected quarterly deficit of N3.53 trillion.
The deficit-to-GDP ratio was estimated at 2.29%, remaining within the 3% threshold stipulated by Nigeria’s Fiscal Responsibility Act and ECOWAS convergence criteria.
The report highlighted that the Q3 2025 fiscal deficit was markedly lower than the N3.17 trillion deficit recorded in the third quarter of 2024.
To finance this deficit, the Federal Government utilized domestic borrowing amounting to N970 billion, proceeds from privatisation totaling N120.61 billion, and multilateral and bilateral project-tied loans valued at N3.13 trillion.
The Budget Office attributed the reduced deficit to stronger fiscal management and intensified revenue mobilisation efforts during the period.
The Federal Government has been focusing on improving tax administration and increasing remittances from government-owned enterprises. Reforms aimed at curbing leakages in public finance management have also contributed to better fiscal outcomes.
However, challenges persist regarding increasing debt servicing obligations, ongoing inflationary pressures, and a continued reliance on borrowing to fund government expenditures.
Nigeria has grappled with persistent fiscal deficits in recent years, primarily due to volatile oil revenues, subsidy-related expenditures, rising recurrent costs, and exchange rate volatility.
Elevated debt servicing costs and revenue shortfalls have placed considerable strain on public finances in recent years. The government has increasingly turned to domestic and external borrowing to cover fiscal gaps and finance essential infrastructure projects.
