By DAYO ADESULU
Governance Failures Undermine Nigeria’s Development Finance Efforts – AfDB Report
Persistent governance failures are frustrating Nigeria’s efforts to raise adequate funds for development, despite recent bold economic reforms, according to the 2025 Nigeria Country Focus Report by the African Development Bank (AfDB).
Released in Abuja, the report—“Making Nigeria’s Capital Work Better for Its Development”—paints a concerning picture of how institutional weaknesses are hampering the country’s ability to mobilise and utilise domestic resources effectively.
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🏛️ Governance Failures Erode Investor Confidence
Nigeria’s development ambitions are being held back by:
- Fragmented regulatory oversight
- Overlapping mandates between federal and state agencies
- Poor inter-agency coordination
- Pervasive corruption
These issues, the report warns, have significantly eroded public trust and discouraged both domestic and foreign investment.
“These structural inefficiencies widen the development finance gap and slow down economic transformation,” the report states.
It urges immediate institutional reforms—streamlining bureaucracy, enforcing anti-corruption laws, digitalising governance, and strengthening the rule of law.
💼 Economic Reforms at Risk Without Strong Institutions
Despite implementing major reforms like fuel subsidy removal, exchange rate unification, and tax restructuring, Nigeria’s efforts risk being undermined without sound governance systems.
- The country currently faces a $31.5 billion annual development financing gap.
- Although revenue has grown modestly, Nigeria’s tax-to-GDP ratio remains at around 13%—among the lowest in Africa.
- Contributing factors include a large informal economy, weak compliance, and inefficient tax administration.
🌍 Natural and Human Capital in Decline
The report also draws attention to the underperformance in Nigeria’s core capital pillars:
📉 Natural Capital
- Over 37% of Nigeria’s national wealth comes from forests, agricultural land, and renewable resources.
- Yet, natural capital per capita has declined by 2.1% annually since 1999, threatening long-term sustainability.
🧑🏫 Human Capital
- Nigeria’s Human Capital Index is 36%, signaling limited investment in education and health.
- In the 2024 budget:
- Education: 7.9%
- Health: 5.3%
- Such low spending levels are insufficient to support future productivity and innovation.
💡 Strategic Solutions and Innovative Finance Tools
The AfDB recommends targeted actions to address these systemic gaps:
- Increase public investment in education and health.
- Reform school curricula and strengthen technical/vocational training.
- Improve tax compliance and public fund management.
- Develop innovative financing mechanisms:
- Diaspora bonds
- Blended finance
- Green bonds
The report estimates that Nigeria’s emerging carbon market could generate up to $2 billion in annual revenue—if well-structured and transparently managed.
📉 GDP Growth to Slow Amid Structural Bottlenecks
- Nigeria’s real GDP growth is expected to decline from 3.4% in 2024 to:
- 3.2% in 2025
- 3.1% in 2026
This slowdown is attributed to unresolved structural challenges and global economic uncertainty.
🗣️ Stakeholders Call for Integrated Capital Strategy
At the report launch, key voices weighed in:
- Dr Abdul Kamara, AfDB Director General for Nigeria: “Nigeria’s capital is not just financial—it’s human, natural, and institutional. All must work together for inclusive transformation.”
- Mr Olufemi Olarinde, Federal Inland Revenue Service: “The report aligns with our current tax reform initiatives and highlights areas needing improvement.”
- Jacob Oduor, AfDB Lead Economist: “Reforms like exchange rate unification need credible institutions to deliver real economic resilience.”
- Joseph Ogebe, Nigeria Economic Summit Group: “Inflation pressures are stifling small businesses. We advocate for a productivity-led deflation strategy.”
🧭 Conclusion: Making Nigeria’s Capital Work
The 2025 Nigeria Country Focus Report provides a blueprint for Nigeria’s development journey. Tackling governance failures, investing in human and natural capital, and embracing innovative finance will be critical for achieving the country’s 2030 development goals.
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