Nigeria’s federation revenues rose to about N84 trillion over the past three years, but roughly 41% was lost to pre-distribution deductions, significantly reducing the amount shared among the three tiers of government, according to findings.
Fiscal data from the World Bank’s latest Nigeria Development Update showed total gross revenues increased from N17.08 trillion in 2023 to N29.45 trillion in 2024 and N37.44 trillion in 2025, bringing cumulative earnings to N83.97 trillion.
However, deductions from the Federation Account climbed from N6.22 trillion in 2023 to N13.38 trillion in 2024 and N14.93 trillion in 2025, totaling N34.53 trillion over the period. This represents about 41.1% of total revenues deducted at source before distribution.
The report said the rising first-line deductions are reducing funds available to federal, state and local governments despite improved revenue performance driven by recent economic reforms.
In its report titled “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development,” the World Bank warned that allocations to key government agencies consume a significant portion of revenues before distribution, shrinking fiscal space for development.
A breakdown showed deductions accounted for 36.4% of revenue in 2023, rising to 45.4% in 2024 before easing to 39.9% in 2025.
Revenue growth outpaced previous years, increasing by 72.4% between 2023 and 2024 and 27.1% between 2024 and 2025. However, deductions rose faster, jumping 115.1% between 2023 and 2024 and 11.6% between 2024 and 2025.
The increase was largely driven by transfers to ministries, departments and agencies funded through fixed percentages of gross revenue collections, including the Nigerian Upstream Petroleum Regulatory Commission, Nigerian Midstream and Downstream Petroleum Regulatory Authority, Nigeria Customs Service, and Nigerian National Petroleum Company Limited.
By 2025, some agencies were receiving more funds than several Nigerian states, the report said.
The findings come amid growing fiscal pressure and rising public debt, which stood at $110.3 billion, or about N159.2 trillion, as of Dec. 31, 2025, raising concerns about sustainability and debt servicing.
The World Bank said many deductions are applied before revenues are shared by the Federation Account Allocation Committee, effectively “pre-committing” a large portion of national income and reducing transparency.
Refunds to subnational governments and statutory obligations also surged, rising from N1.52 trillion in 2023 to N6.87 trillion in 2024 before moderating to N4.57 trillion in 2025. Cost-of-collection transfers increased to N4.18 trillion in 2025.
Despite higher revenues, Nigeria’s fiscal deficit remained elevated at about 3.8% of gross domestic product in 2025, equivalent to N16.9 trillion, as increased recurrent spending offset gains.
Total government expenditure rose to about N29.7 trillion, driven by higher personnel costs, rising debt servicing and off-budget deductions, including N1.1 trillion for military-related spending and N900 billion for development programs.
Capital expenditure declined from N5.5 trillion in 2024 to N4.5 trillion in 2025, with only 24% of the approved capital budget implemented.
The report also highlighted structural weaknesses in Nigeria’s budgeting process, including delays, unrealistic projections and limited transparency.
Commenting on the findings, development economist Aliyu Ilias said the current system allows agencies to access funds directly at source, undermining fiscal discipline and weakening budget oversight.
He warned that the growing scale of deductions poses risks to fiscal sustainability and reduces funds available for development across all tiers of government.
The World Bank recommended reforms, including transitioning agency funding to transparent budget appropriations subject to legislative approval, reducing cost-of-collection rates and phasing out outdated deductions.
It also called for stronger oversight and the publication of audited financial statements to improve transparency and accountability.
The report said such measures could boost distributable revenues and strengthen Nigeria’s fiscal management framework.
