Nigeria's Govt Spends Only 26% of Loans on Capital Projects

Nigeria's Federal Government has spent a mere N3.10tn on capital projects in the first nine months of 2025, despite accessing N11.89tn through various debt financing sources during the same period. This starkly highlights a significant disconnect between the nation's borrowing activities and its infrastructure development.

The latest data from the Budget Office of the Federation's Third Quarter 2025 Budget Implementation Report reveals that total debt financing inflows amounted to N11.89tn by September 2025, comprising N7.08tn from domestic borrowing and N4.81tn from multilateral and bilateral project-tied loans. However, the actual capital expenditure represented only 26.07% of these financing receipts. This spending also fell drastically short of the prorated target for the first three quarters, which was N17.58tn, indicating a shortfall of N14.48tn or 82.3%.

The report details that Ministries, Departments, and Agencies accounted for N1.21tn in capital expenditure, while Government-Owned Enterprises spent N615.68bn. Grants and donor-funded projects contributed N1.08tn. Notably, no expenditure was recorded under the multilateral and bilateral project-tied loan component, despite a budget provision of N2.52tn for such projects over the three quarters.

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Cash management bottlenecks, including bottom-up cash planning delays, continue to slow project execution and raise project cost risks.

Administrative and cash management challenges are identified as key factors slowing down project implementation, according to the Budget Office. "Cash management bottlenecks, including bottom-up cash planning delays, continue to slow project execution and raise project cost risks," the report stated. This situation underscores a continued reliance on borrowing for budget execution, with only a fraction of the funds translating into tangible infrastructure by the end of the third quarter.

Economists are raising concerns about the implications of this borrowing trend. Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, warned that the government's increasing domestic borrowing is crowding out the private sector. He explained that banks are prioritizing low-risk, high-yield government securities over lending to businesses, partly due to attractive rates. Yusuf urged the government to moderate its borrowing habits. The Director-General of the Manufacturers Association of Nigeria, Segun Kadir Ajayi, also noted that financial system credit data indicates a clear crowding-out of private sector borrowing by government debt.

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The increase in credit to the government can be attributed to a number of factors. The government has been raising money to finance the deficit. So, this financing of the deficit has led to the issuance of bonds, treasury bills, and so on, which banks also buy. The rate is also very attractive, and it’s more attractive to them than lending to the real sector.