Nigeria’s public finances are coming under increasing strain, with fresh findings from the World Bank revealing a sharp drop in capital investment, raising concerns about the country’s long-term economic direction and infrastructure development.
Data contained in the bank’s April 2026 Nigeria Development Update shows that federal capital spending fell by about N1tn in 2025, declining from N5.5tn in 2024 to N4.5tn. This represents a drop from 1.3 per cent of GDP to 1.0 per cent, a shift analysts say reflects deeper structural issues within the country’s fiscal framework rather than a one-off adjustment.
The report indicates that while total government expenditure increased significantly to about N29.7tn, equivalent to 6.7 per cent of GDP, most of the increase was driven by recurrent obligations. These include rising personnel costs, mounting debt servicing commitments, and expanded intervention programmes, all of which continue to consume a large share of available revenue.
Further examination of the figures shows that a notable portion of government earnings was deducted at source before reaching the treasury. These deductions included about N1.1tn allocated to military-related interventions and another N900bn tied to the Renewed Hope Development Programme, limiting the funds available for infrastructure and capital projects.
Behind the numbers lies a deeper concern about how public funds are being utilised. While the government continues to allocate resources to capital projects on paper, actual implementation remains weak. The World Bank noted that only about 24 per cent of the prorated 2025 capital budget for Ministries, Departments, and Agencies was executed, leaving a large portion of approved projects either delayed or entirely unimplemented.
Checks across budget performance data and legislative proceedings suggest that the issue is not just about funding shortages but also about systemic inefficiencies. Delays in budget approval have repeatedly disrupted planning cycles, with the 2025 budget reportedly passed weeks after the fiscal year had already begun, while the 2026 budget faced similar setbacks as of the first quarter of the year.
This pattern has created uncertainty for agencies responsible for executing capital projects, many of which rely on timely releases to carry out infrastructure development. In some cases, funds approved for projects are released late or in fragments, slowing down execution and increasing the risk of abandoned projects.
Lawmakers have also acknowledged the growing problem. Recent deliberations in the National Assembly led to an extension of the capital component of the 2025 budget to June 2026, following concerns that many projects had not progressed as expected. The amendment, sponsored by Opeyemi Bamidele, was aimed at preventing disruption to ongoing infrastructure efforts and addressing the backlog of incomplete projects.
Despite improved revenue generation driven by stronger non-oil tax collections such as Company Income Tax and Value Added Tax, the gains have not been sufficient to offset the rising cost of governance at the federal level. The fiscal deficit widened slightly to about 3.1 per cent of GDP in 2025, up from 2.8 per cent in the previous year, indicating that spending continues to outpace revenue growth.
Interestingly, while the Federal Government grapples with tighter fiscal conditions, some state governments have been able to expand their capital spending, largely due to improved revenue inflows. This contrast highlights the uneven nature of fiscal pressure across different tiers of government.
Financial experts point to a broader structural imbalance in Nigeria’s fiscal system, where recurrent expenditure dominates spending priorities. With wages, overheads, and debt servicing taking precedence, capital investment has increasingly become the adjustment tool whenever fiscal pressure intensifies.
The implications are significant. Reduced capital spending affects infrastructure development, slows economic growth, and limits job creation, particularly in sectors that depend heavily on government investment. Over time, this could weaken the country’s ability to compete economically and address critical development challenges.
From an investigative standpoint, the trend raises key questions about fiscal discipline, budget credibility, and policy priorities. Frequent revisions to budget proposals, often without clear macroeconomic justification, have further complicated planning and weakened confidence in the budgeting process.
Newspadi findings suggest that unless there is a deliberate shift in how public funds are managed, the cycle of underfunded and poorly executed projects may persist. The growing reliance on recurrent spending, combined with weak implementation mechanisms, continues to erode the effectiveness of government expenditure.
From Newspadi’s view, the current situation represents more than a fiscal challenge, it is a test of governance and economic direction. A country of Nigeria’s scale cannot sustain long-term growth without consistent investment in infrastructure, education, and critical services. While recurrent spending is unavoidable, the balance has clearly tilted too far away from development-focused expenditure.
Addressing this imbalance will require more than incremental reforms. It will demand stronger fiscal discipline, improved transparency in budget execution, and a renewed commitment to prioritising capital investment. Without these changes, the risk is not just slower growth, but a widening gap between policy intentions and real economic outcomes.
