Nigeria closed the 2022 fiscal year with a staggering budget deficit of ₦7.05 trillion, as government expenditure far outpaced revenue generation amid a persistent fiscal crisis. This alarming deficit reflects a growing trend of heavy borrowing, low capital investment, and unsustainable debt servicing, which have continued to weigh down the nation’s economic trajectory.
The data, derived from the 2022 budget implementation report recently released by the Budget Office of the Federation, paints a troubling picture of Nigeria’s public finance management. Originally, the federal government projected a revenue inflow of ₦9 trillion with a planned deficit of ₦5.2 trillion. However, the actual fiscal gap ballooned by nearly ₦2 trillion, highlighting serious shortfalls in revenue collection and higher-than-anticipated spending.
Federal Revenue Falls Below Expectations
According to the report, the federal government managed to generate only ₦5.8 trillion in total revenue in 2022. This figure represents a significant drop from the ₦6.7 trillion generated in 2021, marking a year-on-year revenue decline of roughly ₦900 billion.
The shortfall was primarily attributed to weaker oil revenue due to production challenges, pipeline vandalism, and subsidy payments. Non-oil revenue sources, although improved in some areas, failed to fully offset the gap left by declining oil exports.
This underperformance forced the government to rely more heavily on borrowing to meet its financial obligations, driving up the nation’s debt burden and interest payment obligations.
Recurrent Expenditure Consumes Bulk of Spending
On the spending side, the federal government incurred ₦5 trillion in recurrent non-debt expenditure. A significant portion of this—₦3.49 trillion—was spent on personnel costs, including salaries and pensions for public sector workers. This figure reflects the growing cost of maintaining the federal civil service and other administrative arms of government.
With limited revenue, the government’s overreliance on recurrent spending has attracted criticism from economists and financial analysts, who argue that excessive spending on consumption rather than investment undermines long-term economic growth and infrastructure development.
Debt Service Swallows Nearly All Revenue
Perhaps the most alarming figure in the report is Nigeria’s debt servicing expenditure for the year, which stood at ₦5.65 trillion. This amount equates to a whopping 97.4% of the government’s actual revenue, leaving just 2.6% of available funds for other obligations.
This situation marks a dangerous shift toward debt dependency. In comparison, debt servicing in 2021 was ₦4.2 trillion, representing 62.8% of revenue for that year. The jump in debt servicing costs underscores how rising interest rates and continuous borrowing have worsened the fiscal strain.
Breaking down the debt service further:
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₦2.5 trillion went toward domestic debt service,
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₦1.1 trillion was spent on servicing external (foreign) debt, and
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₦1.8 trillion was allocated to ways and means advances—central bank overdrafts used to bridge revenue gaps.
The rising costs of servicing these debts have led to growing concerns over Nigeria’s debt sustainability, with fears that future revenues could be entirely consumed by interest and principal repayments if the trend continues unchecked.
Capital Expenditure Falls Below Target
While capital projects are critical for development and economic stimulation, Nigeria’s 2022 capital spending was disappointingly low. The federal government spent only ₦1.89 trillion on capital projects, which was even less than the ₦1.9 trillion spent in 2021.
Worse still, the actual capital expenditure represents just about 50% of the ₦3.6 trillion target set in the budget. The persistent underperformance in capital spending reflects a long-standing challenge in the budget implementation process—where urgent recurrent and debt obligations routinely crowd out much-needed investments in infrastructure, health, education, and economic diversification.
This inadequate investment in capital projects not only stalls development but also stifles job creation, private sector confidence, and long-term economic competitiveness.
Budget Deficit to GDP Ratio Exceeds Legal Limit
The federal government recorded a budget deficit of ₦7.52 trillion in 2022, amounting to 3.77% of the country’s Gross Domestic Product (GDP). This exceeded the 3.0% legal threshold prescribed by the Fiscal Responsibility Act (FRA) of 2007.
The FRA was designed to instill fiscal discipline and limit deficit financing to a manageable level relative to the size of the economy. However, with the current economic challenges and revenue constraints, this legal limit has repeatedly been breached in recent years.
Deficit Financed Largely Through Borrowing
To plug the budget gap, the government resorted to extensive borrowing:
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Foreign borrowing totaled ₦510.21 billion.
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Domestic borrowing amounted to ₦3.65 trillion.
The heavy reliance on domestic borrowing has had a ripple effect on the broader economy, including crowding out private sector access to credit, increasing interest rates, and stifling business expansion.
Moreover, continuous borrowing has raised Nigeria’s total public debt stock to worrisome levels, triggering repeated warnings from multilateral institutions like the International Monetary Fund (IMF) and World Bank.
Mounting Fiscal Risks and the Need for Reform
The 2022 fiscal performance exposes the fragility of Nigeria’s public finance framework and the need for urgent reforms. Key fiscal risks include:
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Heavy dependence on oil revenue despite global moves toward energy transition,
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Poor tax-to-GDP ratio (below 10%, one of the lowest in the world),
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Unchecked growth in personnel and debt service costs,
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Chronic underinvestment in critical infrastructure.
To address these challenges, policy experts have urged the federal government to:
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Expand and diversify revenue sources, especially by improving non-oil revenue collection through effective taxation.
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Curb the rise in recurrent expenditure, particularly through payroll reform and digital auditing.
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Limit borrowing to productive investments with measurable returns.
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Strengthen capital budget implementation to boost job creation and infrastructure growth.
Conclusion: A Pivotal Moment for Nigeria’s Fiscal Future
The 2022 budget performance underscores the urgency for Nigeria to rethink its fiscal strategy and address systemic inefficiencies. With nearly all revenue consumed by debt and personnel costs, the country risks entering a debt trap that could limit its capacity to invest in the future.
If Nigeria continues down this path without decisive reform, future generations may inherit a heavily indebted, underinvested economy. The time to implement credible and sustainable fiscal policies is now—before the burden becomes too overwhelming to manage.
