The Cash Squeeze in Nigeria’s Budget Implementation
Nigeria is currently facing a severe cash squeeze during the implementation of its budget. According to the Central Bank of Nigeria, there is an excessive amount of cash circulating in the economy. Meanwhile, ministers responsible for key sectors are reporting low releases of funds, making it difficult to execute capital projects. Contractors at both the national and state levels are also expressing concerns over non-payment for their services. This situation raises questions: Why is this happening now, when significant amounts of money have been saved from the removal of fuel subsidies, reduced fuel imports due to the operations of the Dangote Refinery and smaller refineries, as well as the massive devaluation of the naira by over 300 per cent? Additionally, the government has been borrowing heavily from both domestic and external markets. How did we arrive at this point?
Reports from The PUNCH on February 18, 2026, revealed that ministries, departments, and agencies of the government received less than N1tn to meet the items in their capital projects between January and July 2025. This figure was obtained directly from the Budget Office, and its authenticity cannot be disputed. If this is the case at the federal level, one can only imagine the situation at the state level, where most states depend on federal allocations to meet their budgetary expenses.
This kind of financial mismanagement is not conducive to economic growth and development. Capital expenditure in the budget has a higher multiplier effect compared to recurrent expenditure. Unfortunately, despite the significant improvements in allocations from the federation account and internally generated revenues (IGR), there have been massive borrowings at the state level. A recent PUNCH report quoted the commissioner for finance, revealing that Ogun State’s debt profile as of December 2025 stood at N494bn, with external debt amounting to N300bn. Even though the IGR has increased from about N50bn in 2020 to above N420bn, the debt continues to grow. It seems ironic that the more revenue is generated, the greater the debt burden becomes. But where are these funds going? They appear to be stored away for the upcoming year’s campaigns and elections.
A table of state debt profiles would likely show a similar trend. This is an important area for researchers and NGOs focused on finance and development. Since the Federal Government is preoccupied with borrowing, it cannot stop the states from doing the same. Even when the Federal Government was not implementing the 2025 annual budget, reports indicated that it was borrowing to fund the budget. As we continue to pay for the debts of previous administrations, such as Jonathan’s presidency, we are spending over 70 per cent of current earnings to meet debt obligations. Future generations are likely to suffer even more as more funds will be committed to repaying this growing debt at all levels.
While other countries are building savings and investments for future generations, the Nigerian government is accumulating debt, creating a pyramid of debt without any visible development. Reports indicate that the number of poor citizens could reach 141 million by the end of this year, which is approximately 62 per cent of the population. Poverty growth is expected to be driven by weak income growth, high inflation, and rising living costs. The North is projected to account for 65 per cent of the poor, or 86 million people, while the South will account for the remaining 35 per cent, or 47 million.
These figures are based on research and should serve as a wake-up call for governors and the Federal Government to prevent such outcomes. However, they seem indifferent. Nigerians who know they will be affected are also not taking action. They might prefer to pray for salvation, but God is not our servant to fight for us.
The Federal Government and the NNPCL Controversy
In its quest for more money to spend or hoard for elections, the Federal Government has taken control of the accounts of the National Petroleum Company of Nigeria (NNPCL). Investigations revealed that the company was taking too much money for itself in its operations. While I agree that taking 50 per cent of the revenue generated by any government department or agency constitutes a breach of fiscal responsibility, NNPCL is a private company, and the way its resources or revenue are shared should be based on shareholders’ contributions. This issue will be addressed another day.
The President justified his actions under the doctrine of necessity, using provisions of the Executive Order (EO) to act on the accounts of the NNPCL. Since the President signed the EO, various groups, including oil industry unions, have raised concerns. Some claims include the balkanisation of the PIA Act. Others argue that the President should have presented his case to the National Assembly for a legal amendment to the Act instead of using the EO.
The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) protested the President’s interference with financial arrangements or the PIA itself. These unions have benefited from the free money for years, even when the refineries were not operational. They never complained about the lack of production or the need for action. My view is that anyone feeling aggrieved should seek redress through the courts.
A Paradigm Shift in Fiscal Architecture
A policy analyst, Ayinde O. Ayinde, explained the President’s actions as a “paradigmatic calibration of Nigeria’s fiscal architecture.” He described it as a shift from discretionary retention to compulsory remittance, from opacity to traceability, and from institutional convenience to constitutional supremacy. In a petroleum-dependent federation where hydrocarbon rents constitute the fiscal bloodstream of the state, the mechanism of revenue custody is not a technicality—it is a destiny. I agree with his sentiment. The days of the petroleum or oil mafia are numbered.
