The World Bank has warned that Nigeria’s cost of collecting revenue has more than doubled within a year, a trend it says is limiting government expenditure on essential infrastructure required to drive growth and development.
According to the Bank’s latest assessment, deductions by the Federation Account Allocation Committee (FAAC) to fund revenue-collecting agencies increased from N871 billion in 2023 to N1.78 trillion in 2024. The report urged the Nigerian authorities to enhance the efficiency and transparency of public spending to ensure that the country’s fiscal resources deliver tangible economic benefits.
The rising cost of revenue mobilisation has come at a time when the nation’s economic challenges are deepening. The World Bank noted that nearly half of Nigeria’s population is now living in poverty, a situation worsened by persistent inflation, weak job creation, and limited fiscal space.
Despite the pressures, the Bank projected that Nigeria’s debt-to-GDP ratio could decline to 39.8 per cent, largely due to improved nominal GDP growth and ongoing debt restructuring efforts. However, it warned that the pace of fiscal reform and the effectiveness of public finance management would determine whether the country can sustain such progress.
The report also highlighted inefficiencies across revenue-generating institutions and called for stronger accountability frameworks to curb waste and leakage. It stressed that while higher revenue collection is critical, the benefits risk being eroded if the cost of collection continues to escalate.
Economists have repeatedly argued that Nigeria’s revenue system remains heavily fragmented, with overlapping functions among agencies such as the Federal Inland Revenue Service (FIRS), the Nigerian Customs Service, and various state-level bodies. The World Bank said streamlining these institutions and reducing administrative expenses would be crucial to achieving fiscal stability and expanding investment in infrastructure and social services.
The warning comes as the government pushes ahead with fiscal consolidation measures aimed at increasing non-oil revenue, rationalising public expenditure, and stabilising the exchange rate. However, analysts caution that without curbing inefficiency and corruption in the revenue system, such efforts may fall short of their intended impact.
