The World Bank has said that inefficiencies in public spending are costing developing nations a significant portion of their investments. Nigeria is among the developing nations of the world.
The global bank disclosed this in its report titled “How Can Developing Countries Power Up Public Investment?,” published on December 16, 2024.
The report found that more than a third of public investment in emerging markets and developing economies is lost to inefficiencies, undermining potential economic growth and development.
It explained that inefficient spending occurs when one dollar of public investment does not result in an equivalent increase in productive public capital.
In extreme cases, it leads to “white elephant” projects with limited economic returns but high costs and, as a result, undermines sovereign risk and debt sustainability.
“Improvements in government spending efficiency are essential for maximizing the benefits of public investment. Estimates suggest over one-third of public investment in EMDEs may be lost to inefficiency, much more than in advanced economies. Institutional weaknesses, such as regulatory bottlenecks and corruption, often result in lower-quality projects” the report stated.
In response, the World Bank urged governments in low- and middle-income countries to focus on improving the efficiency of public spending.
Recommended actions include adopting transparent procurement processes, establishing effective project monitoring and evaluation systems, and ensuring proper maintenance of infrastructure to extend its useful life.
The financier recommended strategies such as enhancing domestic revenue mobilization, reallocating resources from inefficient subsidies, and implementing sound debt management frameworks that can help boost governments’ ability to invest in critical sectors like education, health, and infrastructure.
“Developing nations can utilise frameworks developed by international organisations. For example, the World Bank’s public investment management framework helps countries assess the strengths and weaknesses of their public investment practices.”
It added, “Public-private partnerships can leverage private sector resources, although the success over the past decades has been mixed due to the relative complexity of implementation.
“Technology now enables governments to step away from direct provision as in the case of telecommunications and cellular networks. Instead, effective regulation ensures efficient service of those public goods.”
The report also highlighted the importance of expanding fiscal space to fund these improvements.
Moreover, the World Bank called for increased global support, particularly for low-income nations, to finance large-scale infrastructure projects, especially those related to climate change.
“The international community must step up, particularly on climate-related infrastructure projects, to ensure that developing nations have the resources to make lasting progress,” the report noted.
