Nigeria faces $31.5bn annual development finance gap – Report

Nigeria is facing an annual development finance gap of $31.5 billion, which threatens the country’s ability to meet its Sustainable Development Goals (SDGs) by 2030, according to the African Development Bank’s (AfDB) 2025 Country Focus Report (CFR).

The CFR report titled “Making Nigeria’s Capital Work Better for Its Development” emphasises the urgency of closing this shortfall, which is part of a broader $47.6 billion annual financing need required to drive critical investments in infrastructure, innovation, and social services.

The report attributes this gap to persistent structural weaknesses, low public revenue mobilisation, and overdependence on oil revenue. Despite recent bold fiscal reforms, including the removal of fuel subsidies, the adoption of a market-driven exchange rate, and inflation targeting, Nigeria’s domestic resource mobilisation remains underwhelming.

“Nigeria’s domestic resource mobilization holds considerable promise… but faces significant inefficiencies and structural challenges,” the report states.

With tax revenue-to-GDP at just 5.2 percent, Nigeria ranks lowest in West Africa, underscoring deep fiscal vulnerabilities. Nearly 55 percent of Nigeria’s revenues stem from non-tax sources like oil rents, making the economy highly susceptible to oil price fluctuations and global shocks.

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The AfDB warns that without drastic measures to broaden the tax base, increase compliance, and streamline tax administration, Nigeria’s reliance on oil and external borrowing will continue to strain public finances.

Public debt rose to 52.3 percent of GDP in 2024, with debt servicing consuming 77.5 percent of federal revenues, it said.

The report added that governance and institutional challenges, including corruption, overlapping regulatory mandates, and weak enforcement, further complicate domestic resource mobilization and discourage investment.

The report calls for a “strategic overhaul” of Nigeria’s fiscal and capital mobilization framework, including enhancing tax efficiency and compliance through digital tools, strengthening public sector accountability, expanding domestic capital markets, and leveraging innovative financing such as blended finance and green bonds.

“The scale of Nigeria’s development challenge demands bold policy choices and inclusive growth strategies embracing a Pan-African approach to institutional reform and legal harmonization can spur long-term prosperity,” the AfDB noted.

Despite the challenges, the CFR notes that Nigeria’s vast human, business, and natural capital, if efficiently managed, provides a viable path to achieving a $1 trillion economy by 2030.