The World Bank has raised concerns over Nigeria’s fiscal framework, 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 obtained from its website, the global lender disclosed that although total federation revenue rose sharply to about N84 trillion between 2023 and 2025, about 41 per cent of the earnings did not reach the Federation Account for distribution to 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 rose significantly, from N6.22 trillion to nearly N15 trillion within the same period, reducing the pool of funds available for distribution.
The World Bank noted that the development has created a paradox in which rising revenues have not translated into improved public spending capacity, as a substantial portion is automatically retained by certain agencies before allocation.
It explained that reforms such as the removal of petrol subsidy and foreign exchange adjustments boosted nominal revenues, but much of the gains were offset by the structure of deductions tied to cost of collection and statutory transfers.
Agencies such as the Nigeria Customs Service, Nigerian National Petroleum Company Limited, and the Federal Inland Revenue Service account for a significant portion of these deductions.
The report noted that their funding is based on fixed percentages of gross revenue, leading to higher allocations as revenues increase.
Describing the model as “pro-cyclical”, the Bretton Woods institution said it operates outside the conventional budgetary framework and weakens legislative oversight.
“In some cases, allocations to individual agencies exceed the revenues of several states and even the budgets of key federal ministries”.
The report also highlighted the impact on public finances, noting a decline in capital expenditure from N5.5 trillion in 2024 to N4.5 trillion in 2025, with only about 25 per cent of the approved capital budget implemented.
Meanwhile, the federal fiscal deficit remained elevated at N16.9 trillion, driven by debt servicing and recurrent expenditure.
The World Bank warned that the current arrangement undermines fiscal transparency and accountability, as significant portions of public revenue are spent outside the standard appropriation process
