Juliet Ezeh
The World Bank has revealed that Nigeria’s Federal Government reduced capital spending by N1 trillion in 2025, as rising recurrent expenditure and debt obligations tightened fiscal space.
According to its April 2026 Nigeria Development Update titled Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development, capital expenditure declined from N5.5 trillion in 2024 to N4.5 trillion in 2025.
This drop reflects a shift in government spending priorities, where essential obligations such as salaries, debt servicing, and intervention programmes are increasingly consuming available resources.
Rising Costs Push Infrastructure Spending Down
Despite an increase in total government expenditure to N29.7 trillion, equivalent to 6.7 percent of GDP, much of the spending was absorbed by recurrent expenses.
Personnel costs, rising debt servicing, and intervention programmes significantly reduced funds available for infrastructure and development projects.
The report also highlighted major deductions from Federation Account inflows, including N1.1 trillion for military-related interventions and N900 billion allocated to the Renewed Hope Development Programme.
These financial pressures have forced the government to scale back investments in critical sectors such as roads, power, and public infrastructure.
Weak Budget Execution Worsens Capital Spending Crisis
Beyond reduced allocations, the execution of capital projects remains a major concern.
The report revealed that only 24 percent of the prorated 2025 capital budget of Ministries, Departments, and Agencies was implemented.
This means a large portion of approved projects remained uncompleted or entirely unexecuted, limiting the impact of public spending on economic growth.
Nigeria’s Fiscal Deficit Expands
Nigeria’s fiscal position weakened further in 2025, with the deficit rising to 3.1 percent of GDP, up from 2.8 percent in 2024.
Although revenue improved due to stronger collections from Company Income Tax and Value Added Tax, the gains were not enough to offset rising recurrent expenditure.
At the state level, however, improved revenues allowed subnational governments to increase capital spending, highlighting a contrast with the Federal Government’s tightening fiscal conditions.
Budget Delays and Structural Issues Identified
The World Bank pointed to persistent structural weaknesses in Nigeria’s budget process as a major factor behind poor capital spending outcomes.
Delays in budget approvals and weak coordination between the executive and legislative arms have reduced efficiency and predictability.
For example, the 2025 budget was approved six weeks after the fiscal year ended, while the 2026 budget had not yet been passed as of March 2026.
Frequent and untracked changes to budget proposals have also undermined fiscal planning and credibility.
Senate Extends 2025 Capital Budget Implementation
In response to slow implementation, the Nigerian Senate extended the execution of the 2025 capital budget to June 30, 2026.
The amendment bill was sponsored by Opeyemi Bamidele, who warned that failure to act could worsen the growing number of abandoned projects across the country.
He noted that only about 30 percent of funds had been released to Ministries, Departments, and Agencies, while many critical infrastructure projects risk disruption.
What This Means for Nigeria’s Economy
The report underscores a growing imbalance in Nigeria’s fiscal structure, where recurrent spending continues to dominate government expenditure.
With less investment in infrastructure and development, long-term economic growth could be significantly constrained.
The World Bank emphasised the need for stronger fiscal discipline, improved budget processes, and a renewed focus on capital investment to drive sustainable economic growth.
Juliet Ezeh is the founder and chief reporter at Westbridge Reporters with over 7 years of experience in journalism. She covers crime, industry, policy, and social developments, delivering timely and accurate reporting.