Allocate 1% Of GDP To Education, Infrastructure, IMF Tells Nigeria

Nigeria could unlock a new wave of economic growth by simply reallocating a small slice of its budget, about one percent of Gross Domestic Product (GDP) from recurrent and administrative expenses to productive sectors like education and infrastructure, the International Monetary Fund (IMF) has said.

Nigeria’s spending on education has been on a decline in relation to its GDP since 2012, dropping from 0.55 percent in 2012 to 0.35 percent in 2022. In 2023, Nigeria devoted only 4.4 percent of its total expenditure to education, according to data from the World Bank, a figure far below the UNESCO-recommended 20 per cent benchmark for national education budgets.

In 2025, the government allocated 7.08 per cent of the N66.11 trillion total budget to education, a decrease from 8.21 per cent in 2024.

In its October 2025 Fiscal Monitor Report entitled “Spending Smarter: How Efficient and Well-Allocated Public Spending Can Boost Economic Growth,” the Fund argued that emerging market economies such as Nigeria could achieve as much as a six per cent rise in output from better-targeted spending, without having to raise total expenditure.

According to the Fund, Nigeria’s problem is not how much it spends, but how it spends. While public expenditure has grown over the years, a large portion still goes into wages, subsidies, and administrative costs – areas that do little to drive growth.

Deputy Division Chief of the IMF’s Development Macroeconomic Division, Davide Furceri, said: “Currently, what we are projecting for Nigeria is a neutral fiscal stance, which we believe is consistent with monetary policies aimed at reducing inflation.

“On the spending side, there is room to improve efficiency. Substantial gains can be achieved when countries enhance the composition of their spending. It is also important to increase social spending, particularly to support vulnerable households and ensure inclusive growth.”

The Fund’s global review of public spending efficiency found that emerging economies waste roughly one-third of potential value from existing budgets. In low-income countries, this “efficiency gap” rises to 39 percent, compared to 31 percent in advanced economies.

For Nigeria, the IMF estimates that closing the efficiency gap could boost output by up to seven per cent. Thus, reallocating about N2 trillion, which is about one percent of GDP, from low-impact recurrent costs to capital projects could generate N12–N18 trillion in long-term economic gains.

Nigeria currently spends around 12 per cent of its GDP through the public sector, well below the 32 per cent average for emerging markets.

The IMF said such an imbalance limits the country’s ability to finance long-term growth and human capital development.  It urged the government to redirect resources toward capital formation, education, and research, which have a stronger impact on productivity.

“On the revenue side, there is still scope to improve collections through tax administration reforms and broader revenue mobilisation in ways that do not harm growth. Nigeria has made notable progress, simplifying the tax code, reducing tax expenditures, and easing compliance for businesses. These are steps in the right direction,” Furceri said.

While Nigeria’s public debt, estimated between 44 and 46 per cent of GDP, remains moderate by global standards, the IMF warned that high debt service costs which consumes nearly half of revenues continue to squeeze fiscal space.

The Fund also cautioned that rigid budgets dominated by recurrent obligations, wages, subsidies, and statutory transfers leave little room for transformative investments.

Citing countries like Togo and Serbia, which have implemented medium-term budgeting and spending reviews, the IMF said Nigeria could adopt similar reforms to improve efficiency and achieve better outcomes.

Beyond the macro numbers, the Fund stressed that investing in education and infrastructure reduces inequality and promotes inclusive growth.

Drawing from examples such as Brazil’s Bolsa Família and Rwanda’s education reforms, the IMF said countries that channel more resources into human capital tend to record stronger and fairer economic progress.

Its projections show that reallocating just a fraction of administrative spending toward education and health could lift long-term GDP by up to 6 per cent while improving income distribution.

The IMF outlined a set of key reforms it believes could help Nigeria spend more efficiently and achieve stronger, more inclusive growth.

These include conducting annual spending reviews to identify and eliminate waste, digitising budget and procurement systems to enhance transparency and curb leakages, and reforming wage and subsidy structures to free up fiscal space for investment.

The Fund also urged the government to integrate education, health, and infrastructure policies within a multi-year budgeting framework, while strengthening public investment management systems to ensure that projects are better selected, implemented, and monitored for impact.