Federal Government Capital Spending Remains Severely Constrained Amid Rising Debt Service
Capital expenditure by Nigeria’s Federal Government ministries, departments, and agencies (MDAs) has been significantly limited over the past three fiscal years, even as retained revenues increased and debt servicing consumed a dominant share of resources, The PUNCH reports.
An analysis of the Budget Office of the Federation’s Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper for 2023, 2024, and January–July 2025 shows that MDAs’ capital budgets consistently fell short, leaving a cumulative funding gap of N15.21 trillion over the three-year period.
Despite increases in headline capital allocations, actual releases lagged, reflecting structural pressure on public finances driven largely by rising debt obligations. Across the three years, total budgeted capital expenditure for MDAs and related projects was N27.33 trillion, while actual spending amounted to just N12.13 trillion, meaning MDAs accessed only 44.37% of their capital allocations.
Yearly Breakdown
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2023: N5.31tn budgeted vs N3.25tn spent; shortfall of N2.06tn; performance ratio of 61.15%.
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2024: N11.21tn budgeted vs N5.81tn spent; deficit of N5.40tn; 51.85% performance.
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2025 (Jan–July): Pro-rated budget of N10.81tn vs N834.80bn spent; shortfall of N9.98tn; only 7.72% of expected capital expenditure delivered.
The 2025 MTEF noted that delayed implementation of the 2024 capital budget contributed to the poor performance. A N2.23tn rollover from the 2024 Capital Development Fund provided some relief, but overall capital underfunding persisted.
Debt Service Dominates Fiscal Space
The imbalance between revenue and debt servicing further limits capital funding. In 2023, retained revenue stood at N10.29tn, with N8.56tn spent on debt service—over 83% of revenue. MDAs’ capital spending accounted for only 31.54% of retained revenue.
In 2024, retained revenue rose to N19.88tn, but debt service escalated to N12.63tn, absorbing 63.54% of revenue, while MDAs’ capital spending remained at 29.25%. In the first seven months of 2025, 79.39% of retained revenue went to debt service, compared with just 24.8% allocated to MDAs’ capital projects.
In practical terms, during January–July 2025, the government spent roughly N2.70 on debt service for every N1 spent on capital projects. This dynamic has delayed roads, schools, hospitals, water schemes, and digital infrastructure projects nationwide.
Government-Owned Enterprises and Aggregate Capital Spending
Capital spending by government-owned enterprises (GOEs) also showed uneven performance:
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2023: N573.13bn spent vs N835.39bn budgeted.
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2024: N354.99bn spent vs N820.91bn budgeted.
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2025 (Jan–July): N478.86bn spent, meeting pro rata expectations, suggesting MDAs faced the most severe funding constraints.
Total aggregate capital expenditure, including grants and project-tied loans, also lagged. Of the planned N13.67tn for January–July 2025, only N3.60tn was spent, leaving a N10.07tn gap.
Impact on Contractors and Projects
Delayed funding has disrupted project execution. Contractors under the All Indigenous Contractors Association of Nigeria staged protests over unpaid bills, demanding the release of N760bn owed from 2024 projects. They claimed the government owed about N4tn in total.
The Federal Government assured contractors of payments before year-end and formed a special committee to verify and settle claims. President Bola Tinubu has also requested National Assembly approval to extend the 2025 budget to March 31, 2026, allowing at least 30% of capital allocations to be fully released to MDAs.
Policy Adjustments and Expert Warnings
The 2026 Abridged Budget Call Circular mandates that 70% of the 2025 capital budget be carried forward to 2026 to prioritize completion of ongoing projects. Development economist Dr. Aliyu Ilias warned that repeated delays disrupt project execution, particularly in states that align their fiscal planning with federal releases. He noted that uncertainty in budget timelines undermines credibility and complicates coordination of reforms and expenditure priorities.
