Nigeria’s ambitious capital budgets over the past three years have increasingly collided with a harsh fiscal reality: rising debt service is crowding out development spending, leaving ministries, departments and agencies (MDAs) struggling to execute planned projects.
An examination of Medium-Term Expenditure Framework and Fiscal Strategy Paper data from the Budget Office of the Federation for 2023, 2024 and the January–July period of 2025 shows a persistent and widening gap between what the Federal Government budgeted for capital projects and what was actually released and spent. The result is a cumulative capital funding shortfall of about N15.21tn across the three-year period.
Capital Budgets Rise, Releases Lag
On paper, capital allocations expanded sharply. When measured on a comparable basis—including a pro rata adjustment for 2025—capital expenditure under the heading “Capital Expenditure (MDAs + Others)” totalled N27.33tn over the period. Actual capital spending linked to those votes, however, amounted to just N12.13tn.
In effect, MDAs were able to access only 44.37 per cent of the capital funds earmarked for them, meaning that more than half of planned projects were either delayed, scaled back or left unfunded.
Year-by-Year Breakdown of the Shortfall
The pattern of underperformance was visible in each of the three years, though it worsened over time.
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2023:
Capital expenditure for MDAs and others was budgeted at N5.31tn, but actual spending reached N3.25tn, leaving a gap of N2.06tn. Performance stood at about 61.15 per cent, the strongest result within the three-year window, yet still implying that nearly two-fifths of planned spending was not delivered. -
2024:
The capital budget more than doubled to N11.21tn, reflecting ambitious infrastructure and service delivery plans. Actual expenditure, however, came in at N5.81tn, creating a deficit of N5.40tn and a performance ratio of 51.85 per cent. In absolute terms, the shortfall in 2024 alone exceeded the entire MDAs’ capital budget for 2023. -
2025 (January–July):
Pressure intensified further. Against a full-year capital budget of N18.53tn, the pro rata expectation for the first seven months was N10.81tn. Actual capital spending by MDAs and others during the period was just N834.80bn, translating to a shortfall of N9.98tn and a performance rate of 7.72 per cent.
The MTEF for 2026–2028 acknowledged this weakness, noting that less than 10 per cent of the pro rata capital budget had been released to MDAs by July 2025. Although total capital expenditure reached N3.60tn by that point—partly due to efforts to complete the extended 2024 capital budget—the overall gap remained large.
Rollover Funds Offer Limited Relief
Included in the three-year actual figure is a N2.23tn capital development fund recorded in 2025, covering projects approved under the 2024 budget but financed the following year. While this rollover helped revive some stalled projects, it did little to change the broader picture of chronic underfunding and delayed execution across MDAs.
Debt Service Dominates Fiscal Space
The squeeze on capital spending stands in sharp contrast to the trajectory of retained revenue and debt service obligations.
In 2023, retained revenue stood at N10.29tn, above the budget projection of N8.63tn. Debt service, however, absorbed N8.56tn, or 83.15 per cent of retained revenue. For every N100 earned, about N83 went to servicing debt, leaving limited room for development spending. MDAs’ capital expenditure of N3.25tn represented about 31.54 per cent of retained revenue—less than half the share consumed by debt service.
The imbalance persisted in 2024. Retained revenue rose to N19.88tn, but debt service climbed to N12.63tn, consuming 63.54 per cent of revenue. Capital spending by MDAs stood at N5.81tn, equivalent to 29.25 per cent of retained revenue, a further decline in relative terms despite growing infrastructure needs.
By January–July 2025, the pattern had become more pronounced. Retained revenue of N12.36tn fell well short of the pro rata expectation, while debt service of N9.81tn exceeded its benchmark. As a result, nearly 79.4 per cent of retained revenue in the period went to debt service, compared with N834.80bn spent on MDAs’ capital projects—just 24.8 per cent of revenue.
Overall, the Federal Government spent roughly N2.7 on debt service for every N1 on capital projects during the first seven months of 2025.
MDAs Bear the Brunt
High debt service costs—driven by domestic borrowing, interest on ways and means advances, and rising foreign debt obligations—have taken priority in cash management. Capital releases are often delayed, rationed or pushed into subsequent years, stretching project timelines and weakening implementation.
While government-owned enterprises (GOEs) also recorded mixed capital performance, the strain appeared more severe for MDAs. In 2023 and 2024, GOEs underspent their capital budgets significantly, but by January–July 2025 their capital expenditure matched pro rata expectations, unlike MDAs.
Across the wider capital envelope—including grants and donor-funded projects—performance remained weak. Against a pro rata plan of N13.67tn for January–July 2025, actual capital spending was just N3.60tn, leaving a gap of N10.07tn within seven months.
Projects Delayed, Contractors Protest
For MDAs, the impact is visible on the ground: delayed road works, unfinished schools and hospitals, stalled water schemes, and slow progress in security and digital infrastructure.
The funding gap has also fuelled tensions with contractors. In recent days, members of the All Indigenous Contractors Association of Nigeria protested at the Ministry of Finance, alleging prolonged non-payment for projects executed in 2024. The group claimed outstanding obligations of about N4tn, demanding the release of N760bn it said had earlier been promised.
In response, the Federal Government has sought to calm tensions. The Minister of Works, David Umahi, said President Bola Tinubu had approved a special committee to verify and settle outstanding claims, assuring contractors that payments would be cleared.
Budget Extensions and Credibility Concerns
Persistent underperformance has revived the practice of extending budgets. The 2024 capital budget was rolled into 2025, and the President has since sought legislative approval to extend the implementation of the 2025 Appropriation Act to March 31, 2026. The move, according to the Presidency, is aimed at improving capital releases and ending the practice of running multiple budgets simultaneously.
However, a 2026 Abridged Budget Call Circular has already directed MDAs to roll over 70 per cent of their 2025 capital budgets into 2026, prioritising the completion of ongoing projects amid weak revenues and spending pressures.
Experts Warn of Wider Economic Impact
Development economist and CEO of CSA Advisory, Dr Aliyu Ilias, warned that federal capital spending had become unstable again after several years of improved budget cycles.
“The January–December cycle went perfectly for a few years,” he said. “Now the normalcy we had achieved is already broken. Most capital projects are going to suffer.”
According to Ilias, prolonged delays disrupt project execution across the economy, particularly in states that align their fiscal calendars with federal spending. The uncertainty, he added, undermines credibility and makes it harder for government to align reforms with expenditure priorities.
As retained revenues grow but are increasingly swallowed by debt service and recurrent costs, the gap between capital plans and execution continues to widen—raising fundamental questions about fiscal sustainability and the realism of Nigeria’s annual development budgets.