Persistent governance and institutional weaknesses are hampering Nigeria’s ability to mobilise development finance and implement critical reforms, the African Development Bank (AfDB) has said in its latest assessment of the country’s economic outlook.
The 2025 Nigeria Country Focus Report, unveiled in Abuja last week and titled “Making Nigeria’s Capital Work Better for Its Development”, paints a sobering picture of the structural and institutional challenges undermining Nigeria’s development potential despite recent economic policy shifts.
The report identifies fragmented regulatory oversight, overlapping institutional mandates, and poor coordination across government agencies as key factors eroding public trust, disincentivising investment, and ultimately stalling progress.
“Governance and institutional shortfalls further complicate the domestic resource mobilisation landscape, impeding Nigeria’s ability to capitalise on its wealth,” the report stated.
It added: “Fragmented regulatory oversight, overlapping jurisdictions between federal and subnational entities, and pervasive corruption have eroded public trust and discouraged both domestic and foreign investment.
“These constraints not only widen the development finance gap but also stunt the broader economic transformation process. Tackling them requires a strategic overhaul — streamlining administrative processes, enforcing robust anti-corruption measures, developing digital infrastructure, and reinforcing the rule of law.”
The AfDB warned that without strong institutions and effective governance frameworks, Nigeria risks losing the momentum needed to sustain recent reforms. According to the report, Nigeria currently faces a $31.5 billion annual development financing gap if it hopes to meet the Sustainable Development Goals (SDGs) by 2030.
While the country has introduced tax reforms aimed at improving revenue generation, the report notes that progress remains limited. Nigeria’s tax-to-GDP ratio is estimated at around 13 per cent—among the lowest in sub-Saharan Africa—due largely to its vast informal economy, low tax compliance rates, and inefficiencies in public finance administration.
Beyond fiscal challenges, the AfDB expressed concern over the steady depletion of Nigeria’s natural capital and chronic underinvestment in human capital.
The report revealed that Nigeria’s natural capital—comprising assets like forests, arable land, and renewable resources—accounts for over 37 per cent of the country’s total capital wealth. However, these assets are declining rapidly. Since 1999, per capita natural capital has dropped by an average of 2.1 per cent annually.
Equally alarming is Nigeria’s low Human Capital Index, which remains at 36 per cent. The AfDB attributed this to inadequate federal spending on education and healthcare, sectors critical to building a productive and globally competitive workforce.
In conclusion, the report urges Nigerian policymakers to address governance deficits, strengthen institutional capacity, and invest significantly in people and sustainable natural resource management if the country is to realise its full economic potential.
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