World Bank Releases Fresh Update On Nigeria’s Reforms, Inflation

The World Bank has said Nigeria’s ongoing economic reforms are beginning to yield measurable results, with improved macroeconomic stability, steady growth, and easing inflation recorded over the past year.

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However, the institution warned that the gains remain fragile and could be undermined by rising global energy prices, inflationary pressures, and structural weaknesses in the economy.

According to the bank’s latest Nigeria Development Update released on Tuesday, Nigeria’s real Gross Domestic Product grew by 4.0 per cent in 2025, following a 4.1 per cent expansion recorded in 2024.

The report attributed the growth largely to the services sector, which it said remained the key driver of economic expansion.

Sectors such as Information and Communications Technology, financial services, and real estate were specifically highlighted as major contributors to growth.

The bank added that early indicators for 2026 suggest that growth has continued across most sectors, although at a slightly slower pace due to heightened global tensions.

The World Bank noted a significant decline in inflation over the past year, describing it as one of the key outcomes of Nigeria’s reform efforts.

“Inflation fell to 15.1 per cent year-on-year in February 2026, down from 26.3 per cent a year earlier,” the report stated.

It added that food inflation also recorded a sharp decline.

“Food inflation also declined sharply to 12.1 per cent, easing pressure on household incomes, especially for poorer Nigerians,” the World Bank.

Despite this improvement, the institution cautioned that inflation remains in double digits and continues to pose risks to economic stability.

“Inflation has declined substantially, but it remains in double digits and the Middle East conflict is adding renewed pressures,” the bank warned.

Energy Price Surge Threatens Progress

The report raised concerns over rising fuel costs, warning that recent increases could reverse the gains achieved so far.

It disclosed that petrol prices rose by 45 per cent between February and March 2026, while diesel prices nearly doubled to about N1,800 per litre.

The bank said these developments could worsen inflationary pressures and increase the cost of living for Nigerians.

Despite global uncertainties, the World Bank said Nigeria’s external position remained relatively strong in 2025.

It attributed this to improved exchange rate competitiveness, resilient diaspora remittances, and sustained inflows of foreign portfolio investments.

These factors helped Nigeria maintain a current account surplus of 4.8 per cent of GDP.

The report further noted that external reserves improved significantly, with net reserves rising to $34.8bn and gross reserves reaching $45.5bn.

This, it said, represents about 8.7 months of import cover, indicating stronger external buffers.

On fiscal performance, the World Bank said Nigeria recorded a slight deterioration, with the fiscal deficit widening to 3.1 per cent of GDP in 2025, compared to 2.8 per cent in 2024.

The report explained that although non-oil revenues increased significantly, much of the gains were offset by higher government spending.

“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 report said.

The bank identified increased capital expenditure by state governments and rising recurrent spending at the federal level as key drivers of the deficit expansion.

Looking ahead, the World Bank projected that Nigeria’s economy would grow modestly at an average of about 4.2 per cent between 2026 and 2028.

It said the projection is anchored on sustained reform implementation, improved macroeconomic stability, and increased investment inflows.

However, the institution warned that economic growth alone may not translate into improved living conditions for many Nigerians.

It noted that poverty reduction is likely to remain slow due to weak job creation and the continued impact of inflation on household incomes.

Call For Deeper Structural Reforms

The World Bank stressed that sustaining recent gains would require deeper and more consistent structural reforms.

It called on authorities to strengthen revenue mobilisation, improve fiscal governance, enhance the business environment, and ensure more efficient investments in infrastructure and human capital.

According to the report, Nigeria’s long-term growth prospects will depend largely on its ability to maintain macroeconomic discipline while addressing long-standing structural challenges.

The institution also cautioned the Federal Government against treating rising oil revenues as a basis for increased spending or the reintroduction of subsidies.

While global oil prices have risen above the government’s 2026 benchmark of $64.85 per barrel, reaching as high as $117 and currently trading around $91.78, the bank warned that such gains are temporary and should be managed prudently.

“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, prioritising the rebuilding of buffers over permanent spending increases, particularly in the run-up to elections.”

The bank advised that if inflationary pressures intensify, part of the additional oil revenue could be channelled into targeted support for vulnerable Nigerians.

“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 generalised subsidies,” it stated.

On monetary policy, the World Bank recommended maintaining a tight stance to curb inflation, while preserving exchange rate flexibility to absorb external shocks.

“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 report added.

The bank emphasised that careful management of fiscal and monetary policies, especially in the pre-election period, would be critical to sustaining macroeconomic stability and translating recent economic gains into inclusive growth and improved living standards for Nigerians.