The Federal Government’s capital spending dropped by N1tn in 2025 as rising recurrent expenditure squeezed fiscal space, the World Bank has said.

The bank disclosed this in its April 2026 Nigeria Development Update titled “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development.” It stated, “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 decline came amid a sharp increase in overall government spending, which rose to about 6.7 per cent of GDP, equivalent to N29.7tn, driven largely by higher personnel costs, rising debt service obligations, and increased intervention spending.

According to the report, a significant portion of revenue was also absorbed by deductions at source from Federation Account inflows, including N1.1tn for military-related special interventions and N900bn for the Renewed Hope Development Programme.

These pressures left limited fiscal space for capital projects, forcing the government to cut back on infrastructure and other growth-enhancing investments. The World Bank further noted that beyond the decline in allocations, the execution of capital projects remained weak, reducing the overall impact of public spending.

“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.

The report explained that recurrent expenditure continued to absorb most available fiscal resources, making capital spending the main adjustment tool for managing fiscal pressures. Despite improvements 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 from 2.8 per cent in 2024, as increased spending outpaced revenue gains. It attributed the rise in revenue to stronger non-oil tax collections, including Company Income Tax and Value Added Tax, driven by improved tax administration and compliance.

However, the gains were insufficient to offset the surge in recurrent expenditure at the federal level. While state governments expanded capital spending during the period, supported by improved revenues, the Federal Government faced tighter fiscal constraints due to rising wage bills and interest payments.

The report also highlighted structural weaknesses in Nigeria’s budget process, which it said contributed to poor capital spending outcomes. It noted that delays in budget approval and weak coordination between the executive and legislative arms reduced predictability for programme implementation.

For instance, the 2025 budget was approved six weeks after the end of the fiscal year, while the 2026 budget had yet to be approved as of March 25, 2026. The World Bank added that frequent and untracked changes to budget proposals, often not anchored in macro-fiscal analysis, have further weakened budget credibility and capital expenditure planning.

Overall, it warned that Nigeria’s fiscal structure remains heavily tilted toward recurrent spending, limiting the government’s ability to invest in infrastructure and drive long-term economic growth. The bank stressed the need to strengthen fiscal discipline, improve budget processes, and prioritise capital investment to enhance the growth impact of public spending.

The PUNCH earlier reported that ministers in charge of key infrastructure and service-delivery agencies are grappling with a severe funding squeeze, as MDAs received less than N1tn for capital projects in the first seven months of 2025.

The data used for this report were the most up-to-date available from the Budget Office of the Federation, as the agency had not yet released comprehensive full-year implementation figures, despite the fiscal year being well advanced.

The Senate recently extended the implementation of the capital component of the 2025 budget from March 31 to June 30, 2026. The extension followed the passage of a bill to amend the 2025 Appropriation Act after a clause-by-clause consideration.

The bill was sponsored by the Senate Leader, Senator Opeyemi Bamidele (APC, Ekiti Central). Leading the debate, Bamidele said the amendment became necessary as the execution of capital projects had not reached optimal levels 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 remained relevant, noting that only about 70 per cent were captured in the 2026 budget. Bamidele warned that without the extension, key infrastructure projects of President Bola Tinubu could be disrupted.