• Flags low productivity as key national challenge
•Urges Nigeria to rationalise tax exemptions, reduce leakages
Emmanuel Addeh in Abuja
The African Development Bank (AfDB) has identified Nigeria’s weak domestic revenue base and persistently low productivity as the country’s most pressing economic constraints, warning that unless both are addressed, meeting an estimated $2.3 trillion infrastructure financing requirement by 2043 will remain an uphill task.
In its 2026 Country Focus Report on Nigeria, themed: ‘Mobilising Nigeria’s Development Financing at Scale in a Fragmented World’ the continental lender argued that although the country has embarked on significant fiscal and structural reforms, limited revenue mobilisation and poor productivity continue to undermine the government’s capacity to finance development priorities and sustain long-term economic growth.
The report noted that Nigeria requires approximately $2.3 trillion in infrastructure investment by 2043 to raise its infrastructure stock to about 70 per cent of Gross Domestic Product (GDP), a level considered necessary to support sustained economic transformation.
However, the bank stressed that mobilising such financing would require a much stronger domestic revenue base, deeper financial markets and more efficient use of both public and private capital.
According to the AfDB, the country’s development challenge extends beyond the availability of financing to structural weaknesses that continue to limit economic productivity.
It observed that Nigeria’s economy remains characterised by low agricultural productivity, weak manufacturing competitiveness, inadequate transport and energy infrastructure, insecurity, skills shortages and a labour force concentrated in low-productivity activities. These factors, the report said, continue to constrain economic output and reduce the returns on both public and private investment.
The bank noted that Nigeria’s debt burden compares favourably with many African economies, yet the country’s productivity indicators remain weak. According to the report, Total Factor Productivity (TFP) is estimated at only about 0.3, suggesting that public borrowing has not been sufficiently directed towards investments capable of significantly improving productive capacity or accelerating structural transformation.
The report maintained that the effectiveness of public borrowing should not be measured merely by the size of infrastructure spending or debt accumulation, but by its ability to generate higher productivity, stronger private sector investment, job creation and sustainable economic growth.
Although Nigeria’s debt-to-GDP ratio moderated to about 50.2 per cent in 2025 following GDP rebasing and improved revenue performance, the AfDB cautioned that the country’s fiscal position remains constrained because government revenues are still relatively low compared to financing needs.
The report added that interest payments accounted for an estimated 47.3 per cent of federal government revenue in 2025, significantly limiting fiscal space for capital expenditure and investments in critical sectors.
The AfDB nevertheless acknowledged improvements in domestic revenue mobilisation, noting that government revenue increased from 10.8 per cent of GDP in 2024 to an estimated 13.5 per cent in 2025 following tax reforms and stronger revenue administration.
Despite the progress, the bank stressed that the ratio remains low relative to peer economies and insufficient to finance Nigeria’s ambitious development agenda without greater reliance on private capital and innovative financing mechanisms.
To overcome these challenges, the report urged Nigeria to reduce tax exemptions, formalising the informal sector and strengthening tax administration across all levels of government.
It further called for deeper domestic capital markets capable of mobilising long-term financing from pension funds, insurance companies, sovereign wealth funds and diaspora investors to complement public resources.
According to the AfDB, improving project preparation and governance will also be critical to attracting larger volumes of private investment through public-private partnerships and blended finance arrangements.
The bank argued that addressing Nigeria’s productivity challenge would require sustained investments in transport infrastructure, electricity, digital connectivity, education, healthcare and technological innovation, alongside reforms aimed at improving the business environment and strengthening institutional capacity.
It maintained that while recent reforms, including exchange rate liberalisation, tax reforms, fuel subsidy removal and banking sector recapitalisation, have helped stabilise macroeconomic conditions, long-term economic transformation will depend on whether the country succeeds in converting these reforms into higher productivity, stronger domestic revenue mobilisation and more efficient deployment of development financing.
It stated that Nigeria possesses the economic scale, financial potential and demographic advantage to bridge its infrastructure deficit over time, but warned that achieving this objective would require a decisive shift from dependence on public borrowing.
It therefore advised that the government should look towards a development model anchored on stronger domestic revenues, higher productivity and sustained private sector participation.