Nigeria’s ongoing economic reforms are beginning to deliver positive results, according to the World Bank. However, the institution has cautioned the federal government against using increased oil revenues to fund subsidies or excessive spending.

Economic Growth Holding Steady

In its latest Nigeria Development Update, the World Bank revealed that the country’s economy remains on a steady growth path. Nigeria’s real GDP grew by 4.0% in 2025, slightly below the 4.1% recorded in 2024, with strong contributions from the services sector—particularly ICT, financial services, and real estate.

Early indicators for 2026 also point to continued expansion across multiple sectors, despite some global economic tensions.

Inflation Eases but Still a Concern

One of the most notable improvements is inflation. The report shows that inflation dropped significantly to 15.1% in February 2026, compared to 26.3% a year earlier. Food inflation also declined to 12.1%, offering some relief to households.

Despite this progress, inflation remains high, and new pressures are emerging due to rising global energy prices and ongoing tensions in the Middle East.

Fuel costs are already reflecting this strain:

Petrol prices surged by 45% between February and March

Diesel prices nearly doubled to about ₦1,800 per litre

These increases could push inflation upward again and worsen the cost of living.

External Position Remains Strong

Nigeria’s external finances showed resilience in 2025:

Current account surplus reached 4.8% of GDP

Net reserves rose to $34.8 billion

Gross reserves hit $45.5 billion, covering 8.7 months of imports

This stability was supported by improved exchange rate competitiveness, steady remittances, and continued foreign investment inflows.

Fiscal Pressures Persist

Despite stronger non-oil revenues, Nigeria’s fiscal deficit widened slightly to 3.1% of GDP in 2025, up from 2.8% in 2024. This was largely driven by increased government spending—both at federal and state levels.

Growth Outlook: Modest but Positive

Looking ahead, the World Bank projects Nigeria’s economy will grow at around 4.2% annually between 2026 and 2028.

However, the report warns that poverty reduction will remain slow, as job creation struggles to keep pace with population growth and inflation continues to impact household incomes.

Warning: Don’t Waste Oil Windfall

With global oil prices rising above projections, the World Bank issued a strong warning: treat the extra revenue as temporary.

Instead of increasing spending or reintroducing subsidies, the bank recommends:

Rebuilding financial buffers

Maintaining fiscal discipline

Avoiding election-driven spending increases

Focus on the Vulnerable

If inflation worsens, the World Bank suggests using part of the additional revenue to support vulnerable Nigerians—but only through targeted, time-bound cash transfers, not broad subsidies or price controls.

The Bottom Line

Nigeria is making progress, but the gains are still fragile. Sustaining growth will depend on:

Continued economic reforms

Strong fiscal and monetary discipline

Investments in infrastructure and human capital

The message is clear: stay the course, spend wisely, and protect the most vulnerable.