Nigeria’s revenue growth in 2025 is impressive on paper, but the World Bank has highlighted a growing fiscal leak that threatens the country’s public finances. According to the April 2026 edition of the Nigeria Development Update, more than 39% of federation revenues—about N14.94 trillion—were consumed by statutory and operational deductions before reaching states and local governments. This has left key sectors with less funding to meet public service obligations, even as borrowing costs rise.
The World Bank noted that deductions to federal Ministries, Departments, and Agencies (MDAs) have surged sharply, doubling from N1.9 trillion in 2023 to over N4.2 trillion in 2025, or roughly 1% of GDP. Lead economist Fiseha Gebregziabher explained that many deductions are structured as fixed percentages of gross revenue, meaning that revenue growth automatically increases transfers to MDAs. In many cases, these pre-committed deductions now exceed the total revenues of several Nigerian states.
Experts say that while revenue administration has improved, the bulk of growth reflects higher nominal collections following the removal of FX and PMS subsidies. Several MDAs now receive more funding than some federal ministries tasked with social and growth-oriented projects, raising questions about transparency and fiscal space across the federation. These dynamics create pressure on states to meet infrastructure, social welfare, and development goals.
Recent reforms under Executive Order 9, signed by President Tinubu in February 2026, are targeting these inefficiencies. The order suspended key oil-sector deductions—including the Frontier Exploration Fund, management fees to NNPC, and gas flare penalties—redirecting these funds directly to the federation account. The World Bank estimates these measures could add about 0.4% of GDP in revenue, while further reforms aim to consolidate gains by shifting MDA financing to transparent, budget-approved allocations.
Finance Minister Wale Edun emphasized that the changes aim to ensure that revenues legally owed to the federation account reach their destination without excessive deductions. A dedicated committee has been established to monitor compliance, and officials are reviewing cost-of-collection rates to balance agency efficiency with fiscal discipline. “We’re shining a light on that,” Edun said, highlighting the government’s commitment to transparency and better revenue distribution for all levels of government.
source: Business day