The Federal Government has dismissed claims that Nigeria’s public finances are in a state of collapse, insisting that the country is undergoing a difficult but necessary fiscal correction after years of structural distortions, hidden deficits and heavy monetary financing that had undermined the integrity of the nation’s fiscal architecture.

In a media brief issued by the Federal Ministry of Finance, the government said recent fiscal pressures stem largely from oil revenue shortfalls and foreign exchange rate movements rather than a breakdown of the fiscal system.

The document, titled ‘Deepening Public Understanding of Nigeria’s Fiscal Position: Context and Background’, was signed by the Special Adviser to the Minister of Finance and Coordinating Minister of the Economy on Media and Communications, Dr Ogho Okiti.

The ministry released the clarification amid concerns over low capital releases to ministries, departments and agencies (MDAs) and reports suggesting weak implementation of capital projects.

According to the ministry, much of the concern stems from a misunderstanding of the structure of Nigeria’s fiscal system, particularly the distinction between Federation finances and the finances of the Federal Government.

It said the most significant pressure on federal finances comes from the underperformance of oil and gas revenues.

Projected Federation oil and gas receipts for 2025 were estimated at N37.4 trillion, but actual inflows stood at about N7 trillion — roughly 19 per cent of the projection.

The ministry noted that if projections had been realised, the Federal Government alone would have received an additional N15 trillion in revenue.

It explained that the shortfall has a disproportionate effect on federal finances because oil revenue allocation is heavily weighted in favour of the Federal Government.

Under the existing revenue-sharing framework, the Federal Government receives between 53 and 65 per cent of oil and gas revenues, depending on the component, but only about 20 per cent of Value Added Tax (VAT), with the remaining 80 per cent distributed to states and local governments.

“As a result, oil underperformance can significantly weaken federal revenue even when overall Federation receipts appear relatively stable,” the ministry said.

The government also addressed concerns that low cash releases to MDAs indicate stalled infrastructure delivery.

According to the ministry, capital expenditure continues but is financed through multiple channels beyond direct federal budgetary releases.

It explained that federal capital spending is funded through both direct allocations to MDAs and project-based financing from multilateral and bilateral development partners.

In the latter arrangement, funds are often disbursed directly by development partners for specific projects and may not appear as cash flows in federal government accounts.

This, the ministry argued, can make MDA-focused analysis incomplete and potentially misleading.

Data cited in the brief show that total capital expenditure in 2024 reached N11.59 trillion, representing about 84 per cent of the budget performance.

Provisional figures for 2025, as of November, indicate capital spending of about N11.7 trillion, translating to roughly 76 per cent performance.

“These figures demonstrate that capital projects are ongoing and execution continues. The financing mix differs, but implementation has not been abandoned,” the ministry said.

The clarification follows recent appearances by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, before the
Senate and the House of Representatives during deliberations on the 2026 budget, where lawmakers raised questions about fiscal performance and capital expenditure.

The ministry also addressed concerns over rising debt service obligations, noting that increases largely reflect macroeconomic developments rather than excessive borrowing.