Persistent governance shortcomings continue to hinder Nigeria’s ability to mobilise development finance, despite recent economic reforms, according to the 2025 Nigeria Country Focus Report released by the African Development Bank.
Launched in Abuja on Thursday and titled “Making Nigeria’s Capital Work Better for Its Development”, the report warns that Nigeria is struggling to attract and effectively utilise domestic resources to drive national development.
The report noted that fragmented regulatory oversight, overlapping institutional mandates, and poor coordination among government agencies have continued to erode public trust and deter investment.
“Governance and institutional shortfalls further complicate the domestic resource mobilisation landscape, impeding Nigeria’s ability to capitalise on its wealth.
“Fragmented regulatory oversight, overlapping jurisdictions between federal and subnational entities, and pervasive corruption have eroded public trust and discouraged both domestic and foreign investment.
“These constraints not only widen the development finance gap but also stunt the broader economic transformation process. Tackling them requires a strategic overhaul — streamlining administrative processes, enforcing robust anti-corruption measures, developing digital infrastructure, and reinforcing the rule of law,” the report said.
The findings come as Nigeria implements bold policy shifts, including fuel subsidy removal, exchange rate unification, and tax restructuring.
However, the report cautions that without robust institutions and effective governance, these reforms could lose momentum and fail to deliver lasting impact.
Nigeria faces an annual development financing gap of $31.5 billion if it hopes to meet its Sustainable Development Goals by 2030. Although recent tax reforms have yielded modest revenue gains, the country’s tax-to-GDP ratio remains low—estimated at just 13 percent, one of the lowest in the region.
According to the report, this stems from a large informal sector, poor tax compliance, and inefficiencies in public finance management. It also flagged concerns over the country’s shrinking natural capital and persistent underinvestment in human capital development.
It noted that Nigeria’s natural capital—comprising forests, agricultural land, and renewable resources—accounts for over 37 percent of the country’s capital wealth but is being depleted at an alarming rate.
Since 1999, per capita natural capital has declined by an average of 2.1 percent annually. At the same time, Nigeria’s Human Capital Index remains low at 36 percent, with federal investment in education and healthcare falling short of what is needed to support sustained productivity and long-term development.
Education accounted for just 7.9 per cent of the 2024 budget, while health took up 5.3 per cent. The African Development Bank said Nigeria must increase public investment in health and education, reform curricula to meet market demands, and improve technical and vocational training systems in order to raise productivity and reduce inequality.
Commenting on the significance of the report, Director General for Nigeria at the African Development Bank, Dr Abdul Kamara, said, “This report is both timely and practical. Nigeria is demonstrating bold leadership through difficult but necessary reforms. Its capital is more than financial, it includes human, natural, and institutional assets. What this report shows is the need for integrated strategies that make every form of capital work together to drive inclusive and sustainable transformation.”
The report was officially launched on behalf of the Federal Government by the Head of Fiscal and Tax Reforms Implementation Division at the Federal Inland Revenue Service, Mr Olufemi Olarinde.
Also speaking, the Bank’s Lead Economist for West Africa, Dr. Jacob Oduor, emphasised that while policy tools like a market-based exchange rate system can strengthen Nigeria’s economic resilience, their success hinges on the existence of credible institutions and strong macroeconomic discipline.
