> Yes — an oil-producing country can still borrow even after removing fuel subsidies. - DWI
Removing subsidies helps, but it doesn’t magically fix the whole budget. Here’s why countries like Nigeria still borrow post-subsidy:
1. Subsidy Removal ≠ Instant Cash Surplus
When Nigeria removed PMS subsidy in May 2023, it cut ∼$10B/year in direct costs. But:
- Debt service was already eating >90% of govt revenue in 2022. Subsidy removal freed up cash, but most of it went to paying old debts, not new spending.
- Revenue ≠ profit. You still have salaries, pensions, infrastructure, security, education, health to fund.
2. Oil Revenue is Volatile and Leaky...
Problem Why borrowing still happens
▪︎Oil production shortfall: Nigeria’s OPEC quota is ~1.8M bpd. Actual production often 1.2-1.4M due to theft, vandalism, underinvestment. Less oil = less dollars.
▪︎NNPC deductions: Even post-subsidy, NNPC still deducts for JV cash calls, pipeline security, “frontier exploration” before remitting to FAAC.
▪︎Oil price swings: Budget 2024 benchmarked $77/barrel. If prices dip to $65, revenue holes appear fast.
▪︎FX issues: Oil money comes in USD, but if you don’t have enough USD to meet demand, naira crashes → inflation → more borrowing to stabilize.
3. Structural Deficits Are Bigger Than Subsidy
Fuel subsidy was ∼2-3% of GDP. Nigeria’s fiscal deficit is ∼4-6% of GDP. Other big drains:
1. Debt servicing: ∼$15B/year in 2024. You borrow new money to roll over old debt.
2. Low tax-to-GDP: Nigeria collects ∼6-8% of GDP in tax. OECD average is 34%. So non-oil revenue is tiny.
3. Infrastructure gap: $3T needed by 2040 per AfDB. You can’t build roads/rails/power from oil cash alone.
4. Exchange rate unification: Floating the naira in 2023 tripled debt service costs in naira terms overnight.
4. Real-world examples
-Saudi Arabia: World’s #2 oil producer, no fuel subsidy, still issued $12B in bonds in 2024. Why? Vision 2030 projects + diversification.
- Norway: Oil-rich, no subsidy, no debt. But they saved $1.6T in a sovereign wealth fund since 1990 instead of spending it.
- Angola: Oil producer, removed subsidies 2023, still borrowing from IMF/China because production fell and debt/GDP hit 90%.
So What Would Stop Borrowing?
A country only stops borrowing when: `Revenue + savings > Spending + debt service`
Subsidy removal helps the “revenue” side. But you also need:
1. Production at full quota with minimal theft
2. High tax collection* from non-oil sectors
3. Controlled spending and corruption
4. Sovereign savings during oil booms
For Nigeria Specifically: Tinubu removed subsidy and “saved” ~N4T in 6 months, but debt service was N8.25T in 2024 budget. So borrowing continued to plug the gap.
¤ GLOBAL WATCH
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Numbers on Nigeria’s 2024/2025 budget to show exactly where the money goes
Here’s The Actual Math For Nigeria’s 2024/2025 Budgets — Where The Money Comes From And Where It Goes:
2025 Budget: “Budget of Restoration” — N54.99 trillion total
1. Where the money was expected to come from
- Total revenue target: N34.82 trillion
- Oil assumption: $75/barrel, 2.06M bpd, N1,500/$
- Actual revenue Jan–Oct 2025: N20.7 trillion = 61% of target
2. Where it was budgeted to go
Item Amount% of Total Budget
Debt servicing N14.32 trillion26.0%
Recurrent (non-debt) N13.06 trillion23.8%
Capital expenditure N23.96 trillion43.6%
Statutory transfers N3.65 trillion6.6% Total N54.99 trillion 100%
3. Key Sector Allocations
- Defence & Security: N4.91 trillion
- Infrastructure: N4.06 trillion
- Education: N3.52 trillion
- Health: N2.48 trillion
4. What Actually Happened Jan–Oct 2025
Actual Spend Amount Notes
Debt service N13.69 trillion 66% of N20.7T revenue earned Personnel + pensions**N7.09 trillionCombined with debt = N20.78T vs N20.7T revenue
Capital projects N8.10 trillionOnly 34% of budgeted capital spent by Sept
Total expenditure N31.89 trillion
Bottom line 2025: Debt service + salaries = N20.78T, which was _more than_ the N20.7T revenue earned. So every naira earned went to debt + wages, and capital projects were funded by borrowing.
2024 Budget Performance — N27.5T planned, N28.7T actual spend
1. Revenue: N19.35 trillion total
- Oil: N6.18T
- Non-oil: N4.56T
- Others: N8.32T
2. Key Spending
ItemAmount% of Revenue Debt service**N11.89 trillion 69% of revenue Non-debt recurrent**N8.53 trillion44% of revenue Capital released**N5.81 trillion30% of revenue Total spend**N28.73 trillion148% of revenue.
3. Personnel Costs Specifically: N8.52T for salaries + pensions in 2025 budget, up 59% from N5.35T in 2024. Debt service N16.33T + personnel N8.52T = N24.85T, which is 54% of the entire N46.02T budget before any roads, schools, or hospitals.
Why Borrowing Continues Despite Subsidy Removal
1. Debt is the biggest line item: 26-32% of budget goes to debt service alone. In 2024, 69% of all revenue went to debt.
2. Salaries + debt > revenue: Jan–Jul 2025, FG earned N13.67T but spent N14.32T on debt + wages. That’s 105% of revenue before 1 naira of capital.
3. Revenue underperformance: Oil production 1.2–1.4M bpd vs 2.06M bpd target. Oil revenue Q1–Q3 2024 was N4.63T vs N6.13T target.
4. Capital gets squeezed: Only N3.6T spent on capital Jan–Jul 2025 vs N13.67T planned — 73.7% shortfall. Debt + salaries are “first charge” expenses.
Rule of thumb: If debt service + recurrent > revenue, you must borrow to do anything else. Subsidy removal helped — it added ~N4T in 6 months — but debt service was N8.25T in 2024 budget.
¤ GLOBAL WATCH
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Breaking down the N23.96T capital budget to see what projects got funded vs what was just on paper
Breakdown of Nigeria’s N23.96T 2025 Capital Budget — Funded vs “On Paper”
Short version: Only ∼30% was actually released/funded in 2025. The other 70% got rolled over to 2026.* So most of it stayed “on paper” this year.
1. What Was Budgeted vs What Was Actually Released
Category Budgeted for 2025 Actually Released/Spent by Q3 2025 Status
Total Capital Budget N23.96 trillion~N8.10 trillion spent Jan–Sept 2025 Only 34% executed % of budget released 100% 17% by Q3, 30% total for 2025.
Rolled over to 2026 70% = N16.77T**“On paper” for 2025, real work pushed to 2026
The Ministry of Finance confirmed: “Out of the total N23.96 trillion capital allocation, 30 per cent is now being released, while the remaining 70 per cent has been rolled over into the 2026 budget”.
2. Sector Allocations — Planned vs Funded
The re-enacted 2025 budget ringfenced N16.76T for capital, with these priorities: 7df9
SectorAllocation in BudgetWhat actually got cash-backed/funded
Works & Housing N5.8T for roads/bridgesPartial. FG cleared N2T in contractor arrears from 2024. New releases: N300bn for “critical roads”. Lagos-Calabar Coastal Highway, Sokoto-Badagry Road named as priorities.
Defense & Security N3.5T for hardware, barracksN250bn for military barracks, N120bn military aviation approved. Most big-ticket procurement still unfunded.
Energy & Power N2.1T for grid, rural electrificationNo specific release figures public. Still “on paper” mostly.
Agriculture/Food Security N1.8T for irrigation, agro-hubsN380bn for River Basin irrigation.
Light Rail N400bn for urban railUnclear if released.
Solid Minerals N1T approvedUnclear if released.
Bank of Agriculture N1.6T recapitalizationUnclear if released.
Bottom Line: Of N23.96T planned, only N7.19T was scheduled for release to MDAs starting Feb 2026. By Oct 2025, actual capital spend was N8.10T, vs N13.69T spent on debt service in same period.
3. Why Most Stayed “On Paper”
1. Revenue shortfall: FG earned N20.7T by Oct 2025, but spent N13.69T on debt + N7.09T on salaries = N20.78T. That’s 100.4% of revenue gone before capital.
2. Carryover policy: Govt extended 2024 capital budget to Dec 2025, so N2.23T released for 2024 projects in 2025. Focus was finishing old projects, not starting 2025 ones.
3. 30% implementation target: Tinubu’s letter said revised figures aimed to ensure MDAs hit 30% capital execution. Anything above 30% = rolled to 2026.
4. LCCI warning: “Sum of debt service and recurrent expenditure is greater than revenue projections, implying that capital spending is left without revenue for implementation”.
4. What Was Actually Funded in 2024-2025 — Examples
From releases tracked:
- Works: N300bn for roads, N400bn light rail
- Agriculture: N128.24bn cash-backed, N109.89bn utilized
- Health: N55.77bn cash-backed, N34.82bn spent
- Education*: N54.03bn cash-backed, N31.35bn spent
- Transport: N56.55bn allocation, N43.39bn spent
- Contractor debts: N2T paid to clear 2024 arrears
Govt’s Own Admission: Only 17% of 2025 capital released by Q3. Total 2024 capital performance was 84% = N11.59T. For 2025, provisional was 76% = N11.7T by Nov, but that includes rolled-over 2024 work.
5. The 2026 Rule: “No New Projects ”
Budget circular for 2026 says MDAs must _“upload 70 per cent of their 2025 FGN Budget to continue in FY2026”_ and _“ban on introducing new capital projects”_. Capital ceilings for 2026 = 70% of 2025 allocations. 1ae8
Translation: The N16.77T of 2025 capital that wasn’t funded becomes the 2026 capital budget. Only 30% of 2025 was real; 70% was a placeholder.
> Naturally it is not new that humans do mostly follow influential people blindly because we assume they know better. But the system is there for all to investigate on our own. No perfect nation. Let’s beware of those who are trying to display perfectionism where vulnerability is required.
¤ GLOBAL WATCH
Work and pray as we continue to support our country. We have so much to do and to achieve.
■ DWI CARES
