Despite an improvement in crude oil production, the Federal Government earned 63.49 per cent less than its projected oil revenue target in the first half of 2025, according to the second quarter Budget Performance Report released by the Budget Office on Monday.
The report showed that gross oil revenue of N9.32tn was recorded between January and June 2025, far below the N25.52tn pro-rated budget projection for the period. This translated into a N16.20tn shortfall, underscoring the persistent fragility of Nigeria’s oil-dependent fiscal structure.
Data from the report also indicated that average crude oil production stood at 1.68 million barrels per day, below the budget benchmark of 2.12mbpd, with significant revenue implications for the Federation Account.
However, output improved marginally compared with earlier periods, rising by 0.08mbpd from the 1.6mbpd recorded in the first quarter of 2025 and by 0.27mbpd above the 1.41mbpd produced in the corresponding period of 2024.
Despite missing its revenue target, the half-year performance marked a notable improvement year-on-year, as oil revenue increased by N2.78tn, or 42.59 per cent, compared with the actual half-year earnings recorded in 2024.
The report read, “Gross oil revenue amounting to N9.32tn was collected in the first half of 2025 as against N25.52tn prorate budget projection for the period. This denotes a decrease of N16.20tn (63.49 per cent) from the 2025 half-year budget estimate. It, however, reflects an increase of N2.78tn (42.59 per cent) from the actual half-year gross oil revenue performance reported in 2024.”
Crude oil has remained Nigeria’s single most important source of foreign exchange and public revenue for over five decades, accounting for about 80–90 per cent of export earnings and more than half of government revenue in most fiscal years.
Earnings from crude oil exports largely determine the country’s foreign exchange inflows, the strength of the naira, and the volume of funds available for distribution to the federal, state, and local governments through the Federation Account Allocation Committee.
These revenues are highly sensitive to international oil prices, production volumes, exchange rates, and fiscal terms, making government income vulnerable to external shocks.
Despite its dominance, Nigeria’s reliance on oil has exposed the economy to repeated fiscal stress during periods of price crashes or production disruptions. Challenges such as crude oil theft, pipeline vandalism, underinvestment, operational inefficiencies, and regulatory uncertainty have often constrained output and revenue performance, even when global oil prices are favourable.
A detailed breakdown of the figures revealed mixed outcomes across revenue lines. Concessional rentals surged to N24.82bn, exceeding the half-year projection of N2.06bn by N22.77bn (1,106.99 per cent), while miscellaneous oil revenue, including pipeline fees, rose to N29.73bn, beating its N11.72bn projection by N18.01bn (153.65 per cent).
In contrast, the major oil revenue streams significantly underperformed. Crude oil and gas sales generated N712.57bn, falling short of the N2.36tn target by N1.64tn (69.76 per cent). Petroleum Profit and Gas Taxes yielded N4.16tn, missing the projection of N15.69tn by N11.53tn (73.47 per cent).
Similarly, oil and gas royalties stood at N3.53tn, lower than the N6.86tn estimate by N3.33tn (48.54 per cent), while incidental oil revenue, including royalty recoveries and marginal field licences, came in at N438.90bn, undershooting its N591.76bn projection by N152.87bn (25.83 per cent).
The report also noted that gas flaring penalties and exchange gains, which had no half-year budget projections, contributed N267.25bn and N148.31bn, respectively, during the period under review.
According to the Budget Office, oil revenue performance in the second quarter of 2025 improved compared with 2024 levels, largely due to higher crude output and improved collection of petroleum profit tax and royalties. Non-oil revenues also posted gains, attributed mainly to inflationary pressures and increased economic activities.
On pricing, Nigeria’s crude averaged $74 per barrel in Q2 2025, representing a marginal decline of $0.98 per barrel (1.31 per cent) from Q1 2025 and a sharper drop of $10.76 per barrel (12.69 per cent) compared with the corresponding quarter of 2024. The figure was also $1 below the $75 per barrel benchmark set in the 2025 budget.
Although production improved from 1.6mbpd in Q1 2025 and 1.41mbpd in the same period of 2024, the report highlighted that Nigeria’s oil sector continues to face deep-seated challenges, including crude oil theft, pipeline vandalism, weak security, underinvestment in infrastructure, regulatory uncertainty, and limited domestic refining capacity.
In the second quarter alone, gross oil revenue stood at N4.77tn, representing a N7.99tn (62.62 per cent) shortfall from the N12.76tn quarterly projection. Nonetheless, this was N1.59tn (33.33 per cent) higher than the N3.18tn recorded in the corresponding quarter of 2024.
On the non-oil side, gross non-oil revenue of N4.46tn was recorded in Q2, reflecting an increase of N404.26bn (6.68 per cent) above estimates. After deductions, the net distributable revenue available to the three tiers of government stood at N9.85tn, representing a shortfall of N7.01tn (41.58 per cent).
The figures reinforce ongoing concerns about Nigeria’s fiscal vulnerability amid oil market volatility, production shortfalls, and structural weaknesses, despite reforms introduced under the Petroleum Industry Act.
The report added that Nigeria’s oil sector continues to grapple with deep-seated challenges, including persistent crude oil theft, pipeline vandalism, and inadequate security, which have contributed to production shortfalls and supply disruptions. It noted that underinvestment in modern technology and infrastructure, corruption and regulatory uncertainties, as well as the country’s heavy reliance on crude oil exports, have continued to expose public finances to market volatility.
It further highlighted concerns over limited domestic refining capacity, environmental degradation arising from gas flaring, and weaknesses in the fiscal and policy framework, despite the enactment of the Petroleum Industry Act. According to the report, sustained efforts to resolve legacy production issues and deepen reforms across key sectors of the economy remain critical to economic recovery and revenue stability.
Last week, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, opened up on Tuesday that the Federal Government recorded a significant revenue shortfall in the 2025 fiscal year. He noted that while the Federal Government projected N40.8tn revenue for this year, it ended up making only N10.7tn.
Edun made the disclosure while appearing before the House of Representatives Committees on Finance and National Planning during an interactive session on the 2026–2028 Medium Term Expenditure Framework and Fiscal Strategy Paper.
He recalled that the Federal Government had projected a revenue target of N40.8tn in 2025 to fund the N54.9tn “budget of restoration,” designed to stabilise the economy, secure peace, and lay the foundation for long-term prosperity. However, the minister said current fiscal performance shows that total revenue for the year is likely to end at about N10.7tn.
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