The World Bank Group has reported that Nigeria’s economic performance improved in 2026 with a recovery in growth, public finances, and the external position amid a global oil price shock, noting that sustaining the reform momentum will ensure that the benefits of the reform are widely shared.
The Bretton Woods finance institution, which made this disclosure in its latest ‘Nigeria Development Update (NDU) titled “Beyond the Federal Purse: How Higher Revenues Reshaped State Priorities’ report noted that the recent reforms led a significant increase in revenue, especially to the states.
The report, which specifically focused on where the improved funds were spent, found that the nation’s economy remained resilient, with real GDP growing by 4.2% in the first half of 2026, up from 3.9 and 3.5% in the corresponding periods of 2025 and 2024, respectively.
In a statement issued on Thursday as per the report’s findings, the bank attributed the growth largely by services, alongside a stronger contribution from agriculture. The uptick growth stabilized the poverty rate for the first time since 2019.
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The World Bank reported that the conflict in the Middle East had mixed effects on Nigeria’s economy with higher oil prices strengthened export earnings and contributed to a larger current account surplus, which rose to $12 billion (7.1% of GDP) in the first half of 2026, up from $8.6 billion (6.7% of GDP) a year earlier.
In addition, the report found that the higher oil prices also boosted fiscal revenues, although the gains were moderated by existing oil pre-commitments under forward sales and oil-backed financing arrangements, just as the nation’s gross external reserves rose above $54 billion in September, supported in large part by foreign portfolio inflows, while ongoing reforms have improved the functioning of the foreign exchange market.
The bank further clarified: “At the same time, higher oil prices temporarily stalled the disinflation trend since early 2025. Headline inflation fell sharply from 27.6% in January 2025 to 15.2% in December 2025, supported by tight monetary policy and reduced exchange rate volatility. Higher fuel prices following the onset of the conflict, together with lean season food price pressures, subsequently slowed further progress. Inflation remains elevated and continues to weigh on household purchasing power. The report’s special focus examines how higher public revenues have reshaped state finances and influenced states’ spending priorities. Between 2023 and 2025, gross federation revenues increased by 69% in real terms largely reflecting exchange-rate reforms, the removal of the petrol subsidy, and stronger revenue administration. States recorded the largest increase in federation revenue flows, benefiting not only from higher statutory allocations but also from refunds and the settlement of longstanding federal obligations, dedicated intervention funds, and stronger VAT collections.
“States used additional fiscal space to expand spending on economic infrastructure and strengthen their fiscal positions. Aggregate state revenues rose by about 93% in real terms between 2023 and 2025 (2019 constant prices), while expenditures rose by about 92% over the same period. Capital spending increased, with its share in total expenditure rising from 46% to 61%. Transport infrastructure accounted for the largest increase, alongside substantial increases in spending on housing, agriculture, and other growth-enhancing investments. Spending on health, education, and social protection also rose substantially but grew more slowly than spending on economic infrastructure. Education’s share of total expenditure declined from 14.9% in 2021 to 12.1% in 2025, while health spending remained broadly stable at around 7%. Social protection’s share increased from 1.4% to 4.4% over the same period. This underscores the opportunity to invest in human capital and service delivery to support the creation of more and better jobs”, it added.
Commenting on the report’s findings World Bank Country Director for Nigeria, Mathew Verghis, said: “The bold macroeconomic reforms have substantially increased fiscal revenues at the state level, providing a unique opportunity to improve infrastructure, education, healthcare, and water services, which are critical to creating more and better jobs. Strengthening spending efficiency, accountability, and service delivery will be essential to ensuring that public resources improve the lives of Nigerians.”
According to the report, states have made significant efforts to enhance fiscal reporting and transparency in recent years, as well as expanding internally generated revenue (IGR).
To transform the revenue increase to socioeconomic benefits for Nigerians, the World Bank maintained that measures to improve the efficiency of spending and strengthen internally generated revenue would be important next steps for states.
The NDU projects that Nigeria’s economy will grow by an average of 4.4% between 2026 and 2028, while inflation is expected to decline gradually to about 12% by 2028 and poverty will start to gradually decline.
The World Bank advised: “Sustaining macroeconomic reforms, improving public service delivery, and creating conditions for private sector-led growth and job creation will be essential to faster progress in improving living standards and reducing poverty across the country.
