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LAGOS – Nigeria’s fiscal story is increasingly
defined by a paradox: record-break-
ing revenues in local currency
terms, yet weaker external earnings
due to exchange rate depreciation.
The recently published Q3 2024 budget im-
plementation report, jointly compiled by the
Budget Office of the Federation and the Office
of the Accountant-General, underscores this
contradiction and offers a window into how
2025 may unfold for Africa’s largest economy.
According to the report, gross federally col-
lected revenue for the first nine months of 2024
surged by 78 per cent year-on-year to N22.9
trillion, compared with N12.8 trillion in the
same period of 2023. This performance was
almost in line with the government’s pro-rata
budget target of N23.1 trillion.
But in dollar terms, the picture is striking-
ly different. Revenues amounted to just $15.5
billion, down from $19.9 billion in 9M 2023 — a
22 per cent decline. The culprit is clear: the
naira’s steep devaluation following the 2023 ex-
change rate reforms, which pushed the official
rate from around N645/$ to N1,479/$ in 2024.
As Nigeria enters the final quarter of 2024
and looks ahead to 2025, the fiscal landscape
reflects both encouraging progress and per-
sistent vulnerabilities.
Oil revenues recover, but target missed
Oil revenues, long the backbone of Nige-
ria’s public finances, rebounded in 2024 but
still fell short of expectations.
According to the budget report, oil collec-
tions rose by 102 per cent year-on-year to
N11.2 trillion, representing 48.8 per cent of
total revenues.
Despite higher oil prices and improvements
in pipeline surveillance, Nigeria pumped an
average of just 1.55 million barrels per day
(mb/d) during the reporting period — below
both its OPEC allocation and government
targets.
The 2025 fiscal framework assumes crude
output of 1.70 mb/d, an increase that officials
insist is achievable with ongoing upstream
investments and tighter security in the Niger
Delta. If realised, the higher production level
could significantly lift oil receipts next year,
particularly if Brent prices remain above $80
per barrel.
But, analysts are less optimistic.
“The rebound in oil collections is posi-
tive,” said Johnson Chukwu, chief executive
of Cowry Asset Management. “But it is clear
that Nigeria cannot pin its fiscal stability on
oil alone, particularly in 2025 and beyond. Un-
derinvestment, ageing infrastructure, and the
global shift toward cleaner energy all weigh
heavily on the outlook.”
Non-oil revenues drive momentum
If oil revenue was underwhelming, non-
oil receipts were the real standout of the Q3
2024 report. At N11.7 trillion, non-oil revenues
not only overtook oil’s contribution but also
exceeded budget expectations by 44 per cent .
VAT: Value-added tax receipts surged 96%
y/y to N4.8 trillion, comfortably surpassing
the N3.0 trillion target. The increase was pow-
ered by expanded digital VAT tracking and
stricter enforcement measures.
Corporate Tax: Company income tax col-
lections rose 29% to N4.3 trillion, buoyed by
strong corporate profits in banking, telecom-
munications, and manufacturing.
Customs Duties: Collections jumped 82%
to N2.2 trillion, broadly in line with projec-
tions, aided by higher import values from a
weaker naira.
Other Levies: Electronic money transfer
levies and other special charges climbed 44%
to N401 billion, though they fell short of the
N546 billion budgeted figure.
These results reflect the impact of ongoing
fiscal reforms: digitalisation of collection sys-
tems, broadening of the tax net, and improved
compliance monitoring.
The momentum appears to be continuing
into 2025. Preliminary figures suggest that
non-oil receipts rose 41% y/y to N20.6 trillion
in the first eight months of 2025, underscoring
a structural shift that could gradually ease
Nigeria’s dependence on oil.
“The tax system is finally catching up with
the size of the economy,” observed Ngozi
Okon, a public finance researcher. “The dig-
italisation push has reduced leakages, VAT
compliance has improved dramatically, and
more companies are being brought into the
net. These reforms are the quiet success story
of Nigeria’s fiscal framework.”
More revenue shared among govern-
ments
After statutory deductions, net distribut-
able revenue to the three tiers of government
climbed to N20.4 trillion in 9M 2024 — more
than double the N9.1 trillion shared in the
same period of 2023.
This windfall has provided much-needed
fiscal space for state governments, many of
which rely heavily on federal allocations to
finance infrastructure, education, and health-
care. For some states, the jump in monthly
allocations has been the difference between
fiscal survival and collapse.
However, in real terms, the benefit is more
muted. Headline inflation averaged above 27
per cent in 2024, eroding purchasing power.
At the same time, the weaker naira inflated
the cost of imports, including critical inputs
for construction and public works.
“States are getting more money on paper,
but they are also paying much more for every-
thing,” said Muda Yusuf, head of the Centre
for the Promotion of Private Enterprise. “The
revenue increase is not translating into com-
mensurate improvements in service delivery.”
FX depreciation: The shadow on fiscal
gains
The Q3 report makes clear that Nigeria’s
fiscal trajectory is constrained by currency
weakness. While naira-denominated reve-
nues are soaring, their dollar equivalents are
shrinking — reducing the government’s ex-
ternal purchasing power and complicating
external debt service.
Nigeria’s external debt service obligations
are denominated in foreign currency, primari-
ly US dollars. The decline from $19.9 billion in
9M 2023 to $15.5 billion in 9M 2024 highlights
the squeeze.
A senior finance ministry official, speaking
anonymously, acknowledged the tension: “We
are collecting more naira than ever before,
but when we convert to dollars, our position
is weaker. It is a paradox that affects debt sus-
tainability and investor perception.”
The Central Bank of Nigeria (CBN), un-
der Governor Olayemi Cardoso, is expected
to continue FX reforms in 2025, aimed at deep-
ening market liquidity and attracting foreign
inflows. While reserves have been rising slow-
ly on the back of portfolio inflows, the naira
remains under pressure from strong import
demand and structural trade deficits.
“Unless the naira stabilises or appreciates,
Nigeria’s fiscal revenue will remain under-
mined in dollar terms,” warned Chukwu. “It
is not enough to grow naira collections — ex-
ternal credibility depends on FX stability.”
Analysts weigh 2025 prospects
Economists broadly agree that the trajecto-
ry of Nigeria’s fiscal performance in 2025 will
hinge on three key factors:
Oil output
“If Nigeria can achieve 1.7 mb/d in 2025, we
will likely see oil revenues exceed 2024 levels
in both naira and dollar terms,” said Okon.
“But production risks remain — from pipeline
vandalism to underinvestment in upstream
facilities.”
Non-oil tax reform
The reforms underpinning non-oil growth
appear robust. The continued shift toward
digital payments and cashless transactions
is expected to expand the VAT base further.
Corporate tax revenues are also projected to
remain strong, particularly from financial
services and telecoms.
FX stability
Perhaps the most decisive factor. A more
stable naira in 2025 would improve the dollar
value of revenues, ease debt service burdens,
and restore investor confidence. But if curren-
cy depreciation persists, the paradox of “more
naira, fewer dollars” will remain entrenched.
“Without FX stability, higher naira rev-
enues will continue to mask weaker real
gains,” Chukwu emphasised.
The double-edged sword of inflation
A related challenge is inflation, which av-
eraged over 27 per cent in 2024. High inflation
boosts nominal revenues since taxes on goods,
services, and imports rise with prices. Yet it
also erodes the real value of those revenues,
squeezes household incomes, and drives up
the cost of governance.
For states and local governments, this
means that higher monthly allocations barely
cover the rising costs of salaries, infrastruc-
ture projects, and social spending. “It is a
treadmill effect,” said Yusuf. “The faster rev-
enue rises, the faster costs escalate.”
Toward fiscal resilience?
Nigeria’s fiscal authorities find themselves
at a crossroads. On one hand, revenue mobil-
isation is improving markedly, particularly
in the non-oil sector. On the other, the weak-
ening naira undermines external strength,
leaving the economy vulnerable to debt and
trade shocks.
The government’s 2025 fiscal strategy will
need to balance these dynamics carefully:
Consolidating gains in non-oil revenue
through deeper digitalisation and compliance
measures.
Tackling persistent oil sector bottlenecks,
from crude theft to underinvestment.
Coordinating with the CBN to stabilise the
naira and rebuild external buffers.
If these objectives align, Nigeria could
enter a new phase of fiscal resilience, less
dependent on oil and better able to weather
global shocks. But if oil underperforms and
the naira remains weak, the paradox of “more
naira, less dollar” will persist, limiting the real
gains of rising revenues.
Conclusion: A paradox that defines
2025
The Q3 2024 budget implementation report
paints a picture of progress amid fragility.
Revenues are climbing rapidly in nominal
terms, states are sharing more resources, and
non-oil reforms are bearing fruit.
Yet the depreciation of the naira means Ni-
geria’s external position is weaker, not stron-
ger. For every naira gained, fewer dollars are
realised. This paradox will shape the fiscal de-
bate in 2025 as policymakers confront the hard
reality that rising nominal revenues do not
automatically translate into fiscal strength.
In the words of a Lagos-based analyst: “Ni-
geria is collecting more money than ever, but
the world sees less value. Until the naira is sta-
ble, this paradox will define the fiscal story.”