The World Bank says Nigeria’s capital spending dropped by N1tn in 2025 as rising recurrent expenditure constrained the country’s fiscal space.
The disclosure was contained in the bank’s April 2026 Nigeria Development Update titled “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development.”
According to the report, capital spending declined from 1.3 per cent of GDP (N5.5tn) in 2024 to 1.0 per cent (N4.5tn) in 2025, making it the primary adjustment tool amid mounting fiscal pressures.
Overall government spending rose sharply to about 6.7 per cent of GDP (N29.7tn), driven largely by higher personnel costs, increased debt servicing, and intervention programmes.
Rising fiscal burden
A significant portion of government revenue was absorbed by deductions from Federation Account inflows, including N1.1tn for military-related interventions and N900bn for the Renewed Hope Development Programme.
These obligations left limited room for capital investments, forcing the government to scale back spending on infrastructure and other growth-enhancing projects.
Weak capital execution
The report also highlighted poor implementation of capital budgets, noting that only 24 per cent of the prorated 2025 capital budget of Ministries, Departments, and Agencies was executed.
This, it said, left a large share of approved investments unspent, weakening the overall economic impact of public expenditure.
“Capital execution was particularly weak… limiting the growth impact of public spending,” the bank stated.
Deficit widens
Despite improvements in revenue, Nigeria’s fiscal position deteriorated slightly, with the deficit widening to 3.1 per cent of GDP in 2025 from 2.8 per cent in 2024.
The increase in revenue was attributed to stronger non-oil tax collections such as Company Income Tax and Value Added Tax, supported by better compliance and administration.
However, these gains were insufficient to offset rising recurrent expenditure at the federal level.
Structural challenges
The World Bank pointed to structural weaknesses in Nigeria’s budgeting process, including delays in budget approval and poor coordination between the executive and legislative arms.
It noted that the 2025 budget was approved six weeks after the fiscal year ended, while the 2026 budget remained unapproved as of March 25, 2026.
Frequent changes to budget proposals without strong macro-fiscal backing were also cited as factors undermining budget credibility and capital planning.
Legislative intervention
Meanwhile, the Senate extended the implementation of the capital component of the 2025 budget to June 30, 2026, following an amendment sponsored by Opeyemi Bamidele.
Mr Bamidele warned that poor execution could worsen the problem of abandoned projects and disrupt key infrastructure initiatives under the administration of President Bola Tinubu.
The report underscores the growing imbalance in Nigeria’s fiscal structure, where rising recurrent costs continue to crowd out capital investment, potentially slowing infrastructure development and long-term economic growth.
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