Nigeria’s Oil Revenue Craters as N16.2trn Gap Exposes Deep Fiscal Strain

Nigeria’s fragile public finances came under renewed pressure in the first half of 2025 as the Federal Government recorded a staggering N16.2trn shortfall in oil revenue, despite a modest rebound in crude oil production.

The second-quarter Budget Performance Report released by the Budget Office on Monday showed that gross oil revenue for the January – June period stood at N9.32trn, far below the prorated budget target of N25.52trn. The 63.49 per cent deficit highlights the persistent vulnerability of government finances to oil market volatility and structural inefficiencies within the sector.

Average crude oil production during the period was 1.68 million barrels per day (mbpd), falling short of the 2.12mbpd benchmark used in the 2025 budget. While output improved slightly, rising from 1.6mbpd in the first quarter of 2025 and from 1.41mbpd in the corresponding period of 2024, the increase was insufficient to close the widening revenue gap.

Nonetheless, the report indicated that oil earnings improved on a year-on-year basis. Gross oil revenue rose by N2.78trn, or 42.59 per cent, compared with the actual half-year performance recorded in 2024, reflecting gains from higher output and improved revenue collection.

“Gross oil revenue amounting to N9.32trn was collected in the first half of 2025 as against the N25.52trn prorated budget projection for the period. This represents a shortfall of N16.20trn, or 63.49 per cent,” the report stated, adding that the figure was nonetheless higher than the corresponding period in 2024.

Crude oil remains Nigeria’s dominant source of foreign exchange and government revenue, accounting for about 80–90 per cent of export earnings and more than half of fiscal receipts in most years. As such, fluctuations in oil prices and production volumes have a direct impact on foreign exchange inflows, naira stability and revenue available for sharing among the three tiers of government.

However, decades of overreliance on oil have left public finances highly exposed to external shocks. The sector continues to battle crude oil theft, pipeline vandalism, weak security, underinvestment, operational inefficiencies and regulatory uncertainty, which have constrained production and revenue generation.

A closer look at the revenue components revealed mixed performance. Concessional rentals surged to N24.82bn, exceeding the half-year projection of N2.06bn by more than N22bn. Miscellaneous oil revenue, including pipeline fees, also outperformed expectations, rising to N29.73bn against a projection of N11.72bn.

In contrast, core revenue lines underperformed sharply. Crude oil and gas sales generated N712.57bn, missing the N2.36trn target by N1.64trn. Petroleum profit and gas taxes stood at N4.16trn, falling short of the N15.69trn projection by N11.53trn.

Oil and gas royalties amounted to N3.53trn, below the N6.86trn estimate, while incidental oil revenue, including royalty recoveries and marginal field licences, came in at N438.90bn, undershooting projections by N152.87bn.

Gas flaring penalties and exchange gains, which were not captured in the half-year budget estimates, contributed N267.25bn and N148.31bn, respectively.

The report also showed that Nigeria’s crude oil averaged $74 per barrel in the second quarter of 2025, marginally below the $75 per barrel benchmark set in the budget. The price was lower than both the first quarter of 2025 and the corresponding quarter of 2024, further weighing on revenue performance.

In the second quarter alone, gross oil revenue stood at N4.77trn, representing a N7.99trn shortfall from the quarterly projection of N12.76trn. However, this was still higher than the N3.18trn recorded in the same quarter of 2024, reflecting modest improvements in sector performance.

On the non-oil front, gross non-oil revenue of N4.46trn was recorded in Q2, exceeding estimates by N404.26bn. After deductions, total net distributable revenue available to the federal, state and local governments stood at N9.85trn, a shortfall of N7.01trn, or 41.58 per cent, from projections.

The Budget Office warned that despite reforms under the Petroleum Industry Act, Nigeria’s oil sector remains constrained by deep-rooted structural challenges, including limited domestic refining capacity, environmental degradation from gas flaring and weaknesses in the fiscal and policy framework.

The bleak revenue outlook was echoed last week by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, who disclosed that the Federal Government recorded a significant revenue shortfall in the 2025 fiscal year.

Edun told the House of Representatives Committees on Finance and National Planning that while the government projected N40.8trn in revenue to fund the N54.9trn 2025 “budget of restoration,” actual receipts were about N10.7trn, raising further concerns about fiscal sustainability and the need for accelerated reforms and economic diversification.