By Franklin Iyamah | President Bola Tinubu opened the first day of his tenure by delivering one of Nigeria's most consequential fiscal reforms in decades: the excision of the petrol subsidy scheme.

This would be accompanied by measures which ended the financing of fiscal deficits by the Central Bank of Nigeria (CBN) via the so-called Ways & Means and allowed a sharp Naira depreciation in pursuit of a more functional foreign-exchange market. That inauguration day shock therapy combination of price correction, monetary restraint, and exchange rate liberalisation defined the first phase of Tinubu’s economic reforms. It was politically costly, but it lay down a marker: this administration is willing to take painful stabilisation measures.

Beyond the immediate measures, the administration delivered the most significant overhaul of the Nigerian tax landscape in decades with the passage and signing of four new tax laws in 2025. These legislations streamlined tax administration and simplified a previously fragmented 'motley crew' of tax laws to align with modern economic realities. Collectively, these actions demonstrated that the administration was equally capable of navigating Nigeria’s political systems (parliament and state governors) to secure the legislative backing needed to clear unwieldy policies.

In all, the first-wave reforms removed major fiscal distortions and stabilised the macro-fiscal environment. The key question now is whether the gains from macroeconomic stabilisation can be converted into a durable fiscal reform framework. In practical terms, that means moving beyond one-off price corrections and toward a stronger Nigerian fiscal state—one that mobilises more reliable revenues, budgets credibly, spends more productively, and builds the social legitimacy needed to sustain reform over time. The argument of this paper is that Tinubu’s first wave of reforms removed major distortions, but the unfinished task is to build the institutions that can make those gains durable.

Stabilisation, Revenue Recovery and the Unfinished Agenda

The fiscal dividend of the administration's first-wave reforms is visible in trends across FGN revenues starting with oil revenues, which despite facing a $100/barrel environment collapsed to $2.0 billion in 2022 — weighed down by subsidy costs that effectively netted out a large share of crude receipts — recovered to $3.6 billion in 2023 and continued rising to $4.2 billion in 2024 and $4.7 billion in 2025. Importantly, this recovery occurred against a backdrop of declining oil prices, with Brent averaging $83/barrel in 2023 and falling to $71/barrel by 2025. Over the period, oil production increased from around 1.46 mbpd to 1.66 mbpd, which implies that oil revenue gains through 2023-2025 reflects a combination of higher output and improved FGN take after subsidy removal, rather than an oil price windfall.

Non-oil revenues tell a more complicated story. The $15.2billion recorded in 2023 represented a cyclical peak — but one that requires careful interpretation. The preceding year's figure of $13.5 billion was itself artificially compressed: Nigeria was operating a pegged official exchange rate that traded at a 40–50% discount to the parallel market, meaning dollar-converted revenue figures for 2021–2022 significantly understated the true purchasing-power value of Naira receipts. When the Naira was liberalised in mid-2023, the revaluation effect mechanically inflated dollar-denominated revenues, flattering the 2023 outturn. Stripping out that FX restatement effect, the step-down to $9.7–9.8 billion in 2024–2025 is less a revenue deterioration than a normalisation to a more honest baseline. Crucially, this adjusted baseline sits comfortably above the $4–6 billion trough of 2016–2021 — suggesting that improvements in tax collections and an expansion in the tax base are beginning to embed, even if they are not yet transformative. In aggregate, total FGN revenues of roughly $14 billion in 2024–2025 reflect genuine reform progress; but they also remain well below the $18–22 billion range of the pre-oil-crash era of 2010–2014. That gap — between where FGN revenues presently are and the level required to fund the ever-increasing fiscal demands associated with insecurity and infrastructure delivery — defines the central fiscal challenge of the FGN for the years ahead. 

Fiscal Spending: Stabilisation without Reform and the Burden of Debt Service

On the expense side, the data over the Tinubu era (read without the devaluation lens) suggests a story of successful fiscal consolidation as headline FGN expenditure fell from $34.6 billion in 2023 to $23.3 billion in 2024 and $23.0 billion in 2025. Read with a devaluation lens, it reveals a more complex picture: one where the US-dollar value of Naira-denominated spending fell mechanically, while inflation simultaneously eroded the real purchasing power of budgeted outlays. In other words, the Tinubu administration did not need to engineer large nominal cuts to produce fiscal compression: exchange-rate adjustment and inflation did the heavy lifting.

This mechanism appears to have worked on the primary spending side. Non-debt recurrent expenditure fell from $12.2 billion in 2023 to $6.9 billion in 2024 before recovering modestly to $7.9 billion in 2025. Capital spending also declined, from $9.6 billion in 2023 to $7.8 billion in 2024 and $4.1 billion in 2025. Part of that decline is clearly a translation effect and the usual suppression of capital spending to contain deficits in the face of revenue disappointments. But part of it is also real: inflation and devaluation compressed the FGN’s spending power and forced an adjustment in those parts of the budget that are easiest to squeeze in real terms. 

Debt service was the key exception. Unlike wages, overheads, and domestically-financed capital items, debt-service costs are much harder to inflate away. External debt becomes more expensive in local-currency terms after devaluation, while domestic borrowing costs rise as inflation and interest rates adjust upward. Even with the "FX driven normalisation" in 2024–2025, debt service remains a dominant fixture at $8.5–11.1 billion. By 2025, debt service was absorbing nearly half of total FGN expenditure and was almost three times the capital budget. So, while devaluation and inflation helped compress real spending it did not fix the problem of debt service costs.

Overall, the FGN’s expenditure adjustment was achieved less through large nominal cuts than through exchange-rate liberalisation and inflation, which compressed the real value of non-interest spending while debt service remained stubbornly high. Thus, while the FGN is spending more relative to the size of the economy with a larger headline budget, a larger share of expenditure is directed toward servicing the past rather than investing in the future. This should be the object of FGN fiscal reforms. 

Six Ideas for the Second Wave of Fiscal Reforms 

If the first wave of reform was about stabilisation, the second must be about building out and strengthening the capacity of the Nigerian fiscal side. Nigeria has already shown that it can remove distortions and compress the real size of the budget. The harder task now is to build institutions that can convert those gains into durable fiscal strength. Six key reforms matter most.

First, reclaim federal revenue space and rebuild the finance and treasury function. Nigeria's fiscal apparatus is too fragmented, too agency-driven, and too hollowed out at the centre to sustain a serious reform programme. Budgeting, debt management, cash management, tax administration, and macro-forecasting are dispersed across silos, making coherent planning and disciplined execution difficult. A central symptom is the regime of automatic deductions that allows revenue agencies to retain large operational charges — weakening transparency, fragmenting cash management, and turning parts of revenue administration into quasi-autonomous fiscal agencies. It will be important for all agencies (including those generating and collecting revenues) to be funded according to their needs through the consolidated budget, not through automatic retention percentages. Their costs should be justified openly alongside other MDAs, not hidden in separate budgets or quasi-tax levies. This reform would also end the growing tendency for legislators to manufacture agencies funded via revenue earmarks.

The next reform must rebuild the federal finance function as a professional core of government. That means creating a single Finance Ministry — ending the separation between Finance and Budget — and restoring the DMO and Budget Office under its umbrella. Overall, Nigeria needs a finance ministry staffed by professionals who can produce credible forecasts, run disciplined budgets, manage liabilities, and enforce hard constraints across government. The central fiscal problem is no longer simply one of policy design; it is one of administrative capability.

Second, restore budget credibility and end the era of multiple budgets. As a recent IMF paper documented, Nigeria recorded large fiscal forecast errors over 2011–2023. Nigerian budgets too often carry unrealistic revenue assumptions, exaggerated capital envelopes, overlapping budget cycles, delayed approvals, and off-budget spending whose funding sources are unclear. At times the system appears to be running two or even three budgets simultaneously, with prior-year capital extensions colliding with current-year appropriations and supplementary changes — making a mockery of planning and undermining reformist credibility. Nigeria needs one budget cycle at a time, realistic oil-production and revenue assumptions, hard aggregate ceilings, tighter rules for supplementary appropriations, timely quarterly implementation reports, and full disclosure of off-budget operations. The budget must become a binding fiscal plan rather than an aspirational political document. That should include penalties for delays in meeting publication timelines and a requirement to correct large fiscal forecast errors before new budget items with wide variations are approved.

Third, sanitise the constituency-projects framework and restore executive control over project initiation. One of the clearest symptoms of deteriorating budget credibility is the explosion of legislator-driven insertions. The problem is not simply their number, but that they blur the constitutional boundary between the executive and the legislature, fragment scarce resources into thousands of micro-projects, distort sectoral priorities, and weaken implementation accountability. A recent paper by BudgIT found that the 2025 federal budget included 11,122 added projects worth ₦6.93 trillion — 12.6 percent of the total — covering boreholes, streetlights, and town halls, many assigned to MDAs outside their mandates, poorly costed, and opaque in execution. As Francis Fukuyama documented in “Political Order and Political Decay (2014)”, the transition from a clientelist state to a modern, impersonal bureaucracy is rarely achieved through the sudden abolition of patronage. Instead, it is achieved by creating a "virtuous circle" of institutional discipline. In Nigeria, the immediate priority is not to abolish constituency projects—a move that is likely politically infeasible—but to redesign and discipline them into instruments of genuine development. The executive should reassert its authority to initiate, design, cost, and implement all federally-funded projects. As previously recommended by Agora Policy, all constituency projects should be consolidated into a single, rules-based framework — whether under the existing Strategic Intervention Projects window or a new Constituency Projects Scheme — with a clear spending ceiling, a defined submission timetable, and published eligibility criteria. Legislators can be free to recommend projects during budget preparation, but not to unilaterally create, cost, assign, and approve them. The framework should also specify which project categories qualify for federal funding, bar conflicts of interest in procurement, and require a public portal disclosing project location, cost, implementing agency, contractor, disbursements, and execution status. The goal is to move constituency projects from a vehicle for patronage and budget distortion to a transparent, executive-led mechanism for geographically-balanced but properly-governed public investments.

Fourth, Nigeria needs a serious reform of its government-owned enterprises. One of the largest unresolved fiscal leakages lies in the GOE sector. Many of Nigeria’s commercial public enterprises are neither run as efficient firms nor governed as transparent public utilities. Instead, they occupy a hybrid space in which commercial mandates, political interference, hidden subsidies and weak accountability coexist. The result is predictable: under-remittance, poor service delivery, low profitability and chronic quasi-fiscal losses. That pattern runs across strategically important entities such as NNPC, the Nigerian Ports Authority, NIPOST, FAAN, the Nigerian Railway Corporation and power-sector state entities. The reform priority should therefore be to place commercial GOEs under a common framework of professional governance: credible boards, independently audited accounts, published annual reports, hard remittance rules, and management incentives tied to profitability, asset utilisation and service outcomes. Government should also separate commercial obligations from social obligations. Where the state wants a GOE to provide a public-service function at below-market cost, that subsidy should be explicit in the budget rather than hidden inside weak balance sheets. The aim is not privatisation for its own sake, but commercialisation, transparency and fiscal discipline. Nigeria cannot build a stronger fiscal state while some of its largest public assets remain commercially sub-optimal. These agencies should be reformed with the goal of ensuring that the board and staff are focused on delivering real value for money to the Nigerian taxpayer. 

Five, stabilisation must be translated into a visible social compact through cash transfers and targeted human-capital spending. Reform will remain politically brittle unless households see that fiscal adjustment is producing tangible welfare gains. Nigeria therefore needs a permanent, rules-based social welfare architecture built around targeted cash transfers, backed by effective delivery systems and a credible social registry. The point is to replace inefficient generalised subsidies with direct, transparent support for vulnerable households. But that alone is not enough. The government also needs a focused expenditure push in education and health, not as a broad spending expansion, but as a tightly-targeted capital and service-delivery programme. That means channelling resources into school infrastructure, primary healthcare facilities, learning materials, teacher support, maternal and child health, essential drugs and other interventions with measurable outcomes. The fiscal test should not be how much is allocated on paper, but whether spending produces improvements in enrolment, learning, immunisation, clinic coverage and other concrete indicators. A durable reform agenda must therefore combine protection with productivity: immediate support for households through cash transfers, and longer-term mobility through education and health investment.

Lastly, Nigeria needs to move from hand-to-mouth capital budgeting to projectized capital expenditure financing.One of the key weaknesses in the Nigerian budget system is the way infrastructure projects are financed: too many projects are funded incrementally, year by year, in thin budgetary slices that bear little relationship to the full cost, financing structure, or execution timetable of the asset being built. The result is the familiar landscape of half-finished roads, delayed rail lines, abandoned public buildings, ballooning contract variations, and projects that become more expensive the longer they remain incomplete. In practice, this “brick-by-brick” approach is not merely inefficient, it generates high potential for waste, corruption and low-quality public investments. Nigeria needs to move forward and replace the present approach with a project-based financing model in which major capital projects are prepared, appraised, financed and monitored as discrete investment vehicles rather than as open-ended annual claims on the budget. The finance ministry should have a project preparation and planning function which is able to review and profile MDA projects to ensure they are appropriately framed to ensure they demonstrate value for money of Nigerian taxpayers. 

That shift would require a clear distinction between different kinds of projects. Commercially-viable infrastructure should, wherever possible, be structured to finance itself — through user charges, concessions, land-value capture, special purpose vehicles, or the balance sheets of reformed government-owned enterprises. Projects with strong economic returns but weak direct cash flows should be backed by dedicated multi-year funding, whether through ring-fenced sovereign borrowing, infrastructure funds, or explicitly financed capital envelopes tied to identified assets. And purely social projects should enter the budget only with full life-cycle costing, a realistic implementation plan, and a protected multi-year appropriation. The guiding principle should be simple: no major capital project should be approved without a credible financing plan, a delivery timetable, a responsible sponsoring institution, and milestone-based monitoring. 

This is critical as capital spending is where Nigeria most often mistakes appropriation for delivery. Annual budget allocations create the appearance of investment, but not necessarily the reality of execution. When projects are underfunded at inception and then prolonged over many years, inflation, exchange-rate shocks, procurement failures and political turnover steadily erode value. What begins as a development budget ends up as a mechanism for dispersing rents across incomplete projects. A projectized financing model would reverse that logic. It would force MDAs to prioritise, to cost properly, to finance realistically, and to measure performance against concrete outputs rather than paper allocations. In effect, this reform would turn capital budgeting from an instrument of political patronage into an investment discipline.

Conclusion

Tinubu’s first-wave reforms mattered because they removed major fiscal distortions and forced a degree of macro-fiscal stabilisation. But much of that stabilisation came through price correction, exchange-rate adjustment and real expenditure erosion rather than through the construction of stronger fiscal institutions. The next stage must be different. It must be less about shock therapy and more about building out the capacity of the Nigerian state to raise revenues and deliver value for money to Nigerian taxpayers in its expenditure patterns.

This paper has outlined six key reforms to move the fiscal agenda from stabilisation by erosion to state-building by design. GOE reform would turn public assets from leakages into revenue-producing federal institutions. Treasury reform would end fist-line charges and rebuild the administrative core needed to plan, budget and execute credibly. And a social compact built on targeted transfers and human-capital spending would give reform political legitimacy while raising long-run productivity. Lastly, financing capital investment as serious projects rather than as perpetual budget lines will make a lot of difference. That is the real unfinished agenda: not another round of emergency stabilisation, but the building of a Nigerian fiscal state that is professional, disciplined and development focused.