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The World Bank has raised fresh concerns over Nigeria’s fiscal management system, revealing that more than N34.53 trillion was diverted from federation revenue over the past three years through pre-distribution deductions.
In its latest Nigeria Development Update report, the global lender disclosed that while the country recorded a significant rise in total federation revenue—estimated at about N84 trillion between 2023 and 2025—approximately 41 percent of the earnings never made it into the Federation Account for distribution among the federal, state, and local governments.
According to the report, gross revenue increased from N17.08 trillion in 2023 to an estimated N37.44 trillion in 2025. However, deductions classified as “first-line charges” also surged sharply within the same period, rising from N6.22 trillion to nearly N15 trillion. This, the Bank noted, has significantly reduced the funds available for allocation.
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The report highlighted what it described as a troubling paradox: despite higher revenues driven by recent economic reforms, the country’s public spending capacity has not improved. Instead, a large portion of the income is automatically retained by certain government agencies before it reaches the distributable pool.
Reforms such as the removal of petrol subsidies and adjustments in the foreign exchange regime were credited with boosting nominal revenues. However, the benefits of these measures have been largely offset by the structure of deductions tied to cost-of-collection mechanisms and statutory transfers.
Key agencies—including the Nigeria Customs Service, Nigerian National Petroleum Company Limited, and the Federal Inland Revenue Service—account for a substantial share of these deductions. Their funding models, which are based on fixed percentages of gross revenue, mean their allocations increase automatically as revenue grows.
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The World Bank described this arrangement as “pro-cyclical,” warning that it operates outside the conventional budgetary framework and weakens legislative oversight. In some instances, allocations to individual agencies were said to exceed the revenues of several states and even rival the budgets of major federal ministries.
The report also underscored the broader implications for Nigeria’s public finances. Capital expenditure declined from N5.5 trillion in 2024 to N4.5 trillion in 2025, with only about 25 percent of the approved capital budget implemented. At the same time, the federal fiscal deficit remained high at N16.9 trillion, largely driven by debt servicing obligations and recurrent spending.
The World Bank warned that the current fiscal structure undermines transparency and accountability, as significant portions of public funds are spent outside the formal appropriation process.
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It called for reforms to ensure that revenue flows are better aligned with budgetary oversight and national development priorities.
Source: tribuneonline
