ABUJA, Nigeria (VOICE OF NAIJA)-The World Bank has revealed that the Federal Government’s capital expenditure declined by N1tn in 2025, as rising recurrent spending significantly constrained fiscal space.
This was disclosed in the bank’s April 2026 Nigeria Development Update titled “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development.” It noted, “Capital spending declined from 1.3 per cent of GDP (N5.5tn) in 2024 to 1.0 per cent (N4.5tn) in 2025, serving as the primary adjustment margin.”
The drop occurred despite a substantial increase in total government expenditure, which rose to about 6.7 per cent of GDP, equivalent to N29.7tn.
This surge was largely driven by higher personnel costs, escalating debt service obligations, and increased intervention spending.
The report also pointed out that a significant share of revenue was deducted at source from Federation Account inflows, including N1.1tn allocated for military-related special interventions and N900bn for the Renewed Hope Development Programme.
These fiscal pressures reduced the funds available for capital projects, leading to cuts in infrastructure and other growth-enhancing investments.
The World Bank further observed that, beyond reduced allocations, the execution of capital projects remained weak, limiting the overall effectiveness of public spending.
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“Capital execution was particularly weak, with only 24 per cent of the prorated 2025 capital budget of MDAs implemented, leaving a significant portion of approved investment unspent and limiting the growth impact of public spending,” it added.
According to the report, recurrent expenditure continued to dominate fiscal resources, making capital spending the primary adjustment mechanism for managing budgetary pressures.
Despite some improvement in revenue, Nigeria’s fiscal position weakened slightly during the period.
The bank stated that the consolidated fiscal deficit widened to about 3.1 per cent of GDP in 2025, up from 2.8 per cent in 2024, as spending growth outpaced revenue gains.
It attributed increased revenue to stronger non-oil tax collections, including Company Income Tax and Value Added Tax, supported by better tax administration and compliance.
However, these gains were insufficient to counterbalance the rise in recurrent expenditure at the federal level.
While state governments were able to expand capital spending due to improved revenues, the Federal Government faced tighter fiscal conditions due to rising wage bills and interest payments.
The report also highlighted structural challenges within Nigeria’s budgeting process, noting that they contributed to weak capital spending outcomes.
Delays in budget approvals and poor coordination between the executive and legislative arms were identified as key issues affecting the predictability of programme implementation.
For example, the 2025 budget was approved six weeks after the fiscal year had ended, while the 2026 budget was yet to be approved as of March 25, 2026.
The World Bank added that frequent and untracked revisions to budget proposals, often lacking strong macro-fiscal backing, have further undermined budget credibility and capital expenditure planning.
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Overall, the bank warned that Nigeria’s fiscal structure remains heavily skewed toward recurrent spending, limiting the government’s capacity to invest in infrastructure and support long-term economic growth.
It stressed the need for stronger fiscal discipline, improved budget processes, and a renewed focus on capital investment to enhance the impact of public spending.
Ministers overseeing key infrastructure and service-delivery agencies are facing severe funding constraints, with MDAs receiving less than N1tn for capital projects in the first seven months of 2025.
The data used for the report were the latest available from the Budget Office of the Federation, as comprehensive full-year implementation figures had yet to be released despite the advanced stage of the fiscal year.
Meanwhile, the Senate recently extended the implementation period for the capital component of the 2025 budget from March 31 to June 30, 2026, following the passage of an amendment bill to the 2025 Appropriation Act after clause-by-clause consideration.
The bill, sponsored by Senate Leader Senator Opeyemi Bamidele (APC, Ekiti Central), was introduced to address the slow pace of capital project execution, despite the release of about 30 per cent of funds to Ministries, Departments, and Agencies.
“This situation, if not urgently addressed, risks exacerbating the already troubling incidents of abandoned or partially executed projects across the country,” he said.
He added that many of the projects remain critical, noting that only about 70 per cent were included in the 2026 budget.
Bamidele also warned that without the extension, key infrastructure projects of President Bola Tinubu could face disruption.