*Says interpretations reflect misunderstanding of fiscal system
Ndubuisi Francis in Abuja
The federal government has debunked recent media reports and commentaries that purport to misrepresent the findings of the latest World Bank Nigeria Development Update (NDU), particularly claims suggesting that a significant portion of federation earnings is being “diverted” or constitutes “hidden spending.”
The Minister of State for Finance, Dr. Taiwo Oyedele, in a statement issued yesterday, said the interpretations misrepresented the World Bank’s analysis and reflected a misunderstanding of the fiscal system.
In its latest Nigeria Development Update (NDU) which was launched ŕecently, the World Bank had raised concerns over Nigeria’s fiscal framework, noting that over N34.53 trillion was diverted from federation revenue over the past three years through pre-distribution deductions.
Although total federation revenue rose sharply to about N84 trillion between 2023 and 2025, the Bank noted that about 41 per cent of the earnings did not reach the Federation Account for distribution to the federal, state and local governments.
According to the global development institution, gross revenue increased from N17.08 trillion in 2023 to an estimated N37.44 trillion in 2025.
However, it observed that deductions classified as “first-line charges” also rose significantly, from N6.22 trillion to nearly N15 trillion within the same period, reducing the pool of funds available for distribution.
The World Bank observed that the development had created a paradox in which rising revenues have not translated into improved public spending capacity, as a substantial portion is automatically retained by certain agencies before allocation.
It explained that reforms such as the removal of petrol subsidy and foreign exchange adjustments boosted nominal revenues, adding that much of the gains were offset by the structure of deductions tied to cost of collection and statutory transfers.
Following the World Bank report, some organisations and individuals have continued to call for an forensic inquiry.
For instance, ActionAid Nigeria demanded for an urgent forensic audit of Nigeria’s revenue management system.
It stated that the magnitude of the deductions—accounting for over 40 per cent of federal revenue in recent years pointed to systemic weaknesses in public financial management and poses a serious threat to fiscal stability and development financing.
According to the group, findings by the World Bank confirmed that a significant portion of government income is being absorbed through pre-distribution charges, including cost-of-collection frameworks and agency remittances, with limited transparency on their composition and utilisation.
“These findings reinforce long-standing concerns about Nigeria’s widening fiscal constraints and rising debt burden,” the group said. “The persistence of large-scale revenue leakages represents both a governance failure and a missed opportunity to strengthen fiscal stability.”
The deductions, estimated at over N34 trillio, it stressed, have continued to rise alongside government revenues, leaving federal, state, and local governments with significantly reduced resources to fund public services.
It, therefore warned that the trend is worsening Nigeria’s reliance on borrowing, citing projections by the International Monetary Fund that the country’s debt-to-GDP ratio could climb to 33.1 per cent by 2027.
Also reacting to the World Bank report over the weekend, the presidential candidate of Labour Party in the 2023 elections, Mr. Peter Obi expressed concern that despite increased national revenue, Nigeria continues to suffer significant financial losses within its system.
He conveyed his thoughts his verified X handle on Saturday while reacting to a World Bank report which stated that Nigeria generated about ₦84 trillion in federation revenue over the past three years.
He decried what he described as massive revenue leakages, alleging that about 41 per cent of the total sum—approximately ₦34.44 trillion—was not remitted to the Federation Account.
This amount, he observed, was higher than the combined ₦34 trillion allocated for capital projects in the 2024 and 2025 national budgets, describing the development as an indication of the scale of financial mismanagement in the system.
Obi stated that the development reflects deep-rooted challenges in public finance administration, which continue to undermine key sectors such as healthcare, education, and infrastructure.
But while debunking the concerns raised by ActionAid and others concerning the World Bank report, Oyedele explained that
that they misrepresented the findings of the lBank, particularly claims suggesting that a significant portion of federation earnings is being “diverted” or constitutes “hidden spending.”
According to him, they incorrectly characterised Federation Account Allocation Committee (FAAC) deductions as “waste” or missing funds, noting that it was incorrect.
Further countering the groups, he noted that FAAC deductions, as presented in the World Bank report, include: Statutory transfers, savings and investments, security-related expenditures, cost-of-collection charges, Refunds to Ministries, Departments and Agencies (MDAs), as well as Transfers and interventions benefiting subnational governments.
He stressed, “It is important to emphasise that refunds and transfers to states and other tiers of government are not leakages. They represent legitimate fiscal flows, including repayments of obligations and statutorily backed allocations.”
According to him, “Some commentaries selectively relied on past data while ignoring the forward-looking analysis and ongoing public financial management reforms highlighted in the report.
“The World Bank explicitly notes that reforms implemented in early 2026, including the recently signed Executive Order to safeguard remittance of petroleum revenues, are already addressing concerns around deductions, and are expected to improve transparency while increasing revenues available to all tiers of government by about 0.4% of GDP annually.
“Misinterpreting one aspect of the analysis without acknowledging the progressive reforms and measures already introduced to enhance distributable federation revenues gives a distorted picture.”
Oyedele stressed that the broader message of the World Bank report is positive and forward-looking to the extent that economic growth is becoming more broad-based across sectors, and inflation, while still elevated, is declining due to deliberate policy actions.
The minister added that the World Bank also conveyed the message that Nigeria’s external position has strengthened significantly, with improved reserves and a current account surplus, just as debt indicators have improved, including a decline in the debt-to-GDP ratio– the first in over a decade.
“These developments reflect the outcomes of the current administration’s ongoing macroeconomic policies and public financial management reforms.
“The World Bank does not conclude that Nigeria’s fiscal system is collapsing or that reforms have failed. Rather, it states that reforms are working, and they must be sustained and deepened to translate macroeconomic gains into inclusive growth,
“Oyedele added.
He affirmed that the federal government remains committed to strengthening fiscal transparency, improving revenue mobilisation, ensuring efficient public spending, and deepening reforms to support inclusive economic growth.
The minister maintained that an accurate understanding and responsible reporting of fiscal information are critical to maintaining confidence in Nigeria’s reform trajectory and economic outlook.
He urged stakeholders, media organisations, and the public to engage constructively with fiscal information and avoid twisted interpretations that may undermine reform efforts and fuel public discord
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