The World Bank says Nigeria’s economic reforms are beginning
to yield results.
The Bretton Woods institution said Nigeria’s economy has
strengthened on the back of stabilisation reforms, with growth remaining steady
and key macroeconomic indicators improving.
According to the bank’s Nigeria Development Update released
on Tuesday, the country’s real gross domestic product (GDP) grew by 4.0 percent
in 2025, following a 4.1 percent expansion in 2024, driven largely by the
services sector, particularly ICT, financial services, and real estate.
The bank said that early 2026 indicators suggest continued
growth across sectors, despite a slight slowdown triggered by global tensions.
On inflation, the report noted a significant decline over
the past year, although the bank said price pressures remain elevated.
“Inflation fell to 15.1 percent year-on-year in February
2026, down from 26.3 percent a year earlier,” the report said.
“Food inflation also declined sharply to 12.1 percent,
easing pressure on household incomes, especially for poorer Nigerians.”
However, the World Bank warned that the gains remain
fragile, as rising global energy and commodity prices, driven by the Middle
East crisis, are beginning to reverse some of the progress.
“Inflation has declined substantially, but it remains in
double digits and the Middle East conflict is adding renewed pressures, ” the
World Bank said.
The report said petrol prices rose by 45 percent between
February and March, while diesel prices nearly doubled to about N1,800 per
litre, posing fresh risks to inflation and living costs.
Despite the pressures, the World Bank said Nigeria’s
external position remained relatively strong in 2025.
The bank said a combination of improved exchange rate
competitiveness, resilient remittances, and sustained foreign portfolio
investment inflows helped maintain a current account surplus of 4.8 percent of
GDP.
It added that external reserves also improved, with net
reserves rising to $34.8 billion and gross reserves reaching $45.5 billion —
equivalent to 8.7 months of import cover.
“Nigeria’s fiscal deficit widened slightly in 2025, as the
continued surge in non-oil revenues was largely absorbed by increased
state-level capital spending and higher federal recurrent spending,” the bank
said.
On fiscal performance, the report said Nigeria’s deficit
widened slightly to 3.1 percent of GDP in 2025, up from 2.8 percent in 2024,
despite stronger non-oil revenue collections.
The bank attributed the increase to higher recurrent
spending at the federal level and increased capital expenditure by state
governments.
‘NIGERIA’S ECONOMY WILL GROW TO 4.2% BETWEEN 2026 AND
2028’
Looking ahead, the bank projected that Nigeria’s economy
would grow modestly to about 4.2 percent between 2026 and 2028, supported by
ongoing reforms, improved macroeconomic stability, and increased investment.
However, it warned that poverty reduction will remain slow,
as job creation continues to lag behind population growth and inflation erodes
household incomes.
The report added that sustaining reform momentum will be
critical to translating recent gains into inclusive growth and improved living
standards.
The institution called for deeper structural reforms,
including strengthening revenue mobilisation, improving fiscal governance,
enhancing the business environment, and investing more efficiently in
infrastructure and human capital.
The World Bank also said that Nigeria’s long-term growth
prospects will depend on its ability to maintain macroeconomic discipline while
addressing deep-rooted structural challenges.
WORLD BANK TO FG: USE REVENUE GAINS TO SUPPORT VULNERABLE
HOUSEHOLDS
The Bretton Woods institution advised the federal government
against treating rising oil revenues as a basis for increased spending or
funding subsidies.
While higher global oil prices are expected to boost
government revenues in the short term, the World Bank warned that such gains
should be treated as temporary.
“Preserving recent stabilisation gains will require a
disciplined and well-calibrated policy response to manage the effects of the
Middle East conflict,” the World Bank said.
“Fiscal policy should treat higher oil revenues as a
temporary windfall, prioritizing the rebuilding of buffers over permanent
spending increases, particularly in the run-up to elections.
“If inflationary pressures intensify, part of the revenue
gains could be used to support vulnerable households through targeted,
time-bound cash transfers, while avoiding inefficient price controls or
generalized subsidies
“Monetary policy needs to remain tight to contain inflation,
and exchange rate flexibility should be maintained to absorb external shocks,
with interventions limited to smoothing excessive volatility.”
The bank advised that any additional revenue should be used
cautiously, particularly in the run-up to elections, to avoid undermining
macroeconomic stability.
It recommended that part of the windfall could be channelled
into targeted, time-bound support for vulnerable households, rather than broad
subsidies or price controls.
The World Bank also stressed the need for continued tight
monetary policy to contain inflation and maintain exchange rate flexibility to
absorb external shocks.
The federal government had projected a crude oil benchmark
of $64.85 per barrel for 2026; however, oil price has increased as high as $117
per barrel, but currently trades at $91.78.
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